Correlation Between Cheesecake Factory and Joint Stock

Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and Joint Stock at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cheesecake Factory and Joint Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Cheesecake Factory and Joint Stock, you can compare the effects of market volatilities on Cheesecake Factory and Joint Stock and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cheesecake Factory with a short position of Joint Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and Joint Stock.

Diversification Opportunities for Cheesecake Factory and Joint Stock

-0.29

Correlation Coefficient

Cheesecake Factory  Joint Stock

Very good diversification

The 3 months correlation between Cheesecake and Joint is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock and Cheesecake Factory is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Cheesecake Factory are associated (or correlated) with Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Joint Stock go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Joint Stock

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 0.76 times more return on investment than Joint Stock. However, The Cheesecake Factory is 1.32 times less risky than Joint Stock. It trades about 0.11 of its potential returns per unit of risk. Joint Stock is currently generating about -0.14 per unit of risk. If you would invest  4,747  in The Cheesecake Factory on October 23, 2024 and sell it today you would earn a total of  129.00  from holding The Cheesecake Factory or generate 2.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Cheesecake Factory  vs.  Joint Stock

The Cheesecake Factory

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Cheesecake Factory exhibited solid returns over the last few months and may actually be approaching a breakup point.

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Cheesecake Factory and Joint Stock

The main advantage of trading using opposite Cheesecake Factory and Joint Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, Joint Stock can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Joint Stock will offset losses from the drop in Joint Stock's long position.

The idea behind The Cheesecake Factory and Joint Stock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.