Correlation Between Cheesecake Factory and Lizhan Environmental

Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and Lizhan Environmental 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 Lizhan Environmental 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 Lizhan Environmental, you can compare the effects of market volatilities on Cheesecake Factory and Lizhan Environmental 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 Lizhan Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and Lizhan Environmental.

Diversification Opportunities for Cheesecake Factory and Lizhan Environmental

0.0

Correlation Coefficient

Cheesecake Factory  Lizhan Environmental

Pay attention - limited upside

The 3 months correlation between Cheesecake and Lizhan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Lizhan Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lizhan Environmental 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 Lizhan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lizhan Environmental has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Lizhan Environmental go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Lizhan Environmental

If you would invest  3,674  in The Cheesecake Factory on October 11, 2024 and sell it today you would earn a total of  1,299  from holding The Cheesecake Factory or generate 35.36% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Lizhan Environmental

The Cheesecake Factory

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 13 (%) 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.

Lizhan Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lizhan Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lizhan Environmental is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cheesecake Factory and Lizhan Environmental

The main advantage of trading using opposite Cheesecake Factory and Lizhan Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, Lizhan Environmental 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 Lizhan Environmental will offset losses from the drop in Lizhan Environmental's long position.

The idea behind The Cheesecake Factory and Lizhan Environmental 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.