Correlation Between Cheesecake Factory and Minerals Technologies

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

Diversification Opportunities for Cheesecake Factory and Minerals Technologies

0.5

Correlation Coefficient

Cheesecake Factory  Minerals Technologies

Very weak diversification

The 3 months correlation between Cheesecake and Minerals is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Minerals Technologies go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Minerals Technologies

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.29 times more return on investment than Minerals Technologies. However, Cheesecake Factory is 1.29 times more volatile than Minerals Technologies. It trades about 0.15 of its potential returns per unit of risk. Minerals Technologies is currently generating about 0.01 per unit of risk. If you would invest  4,030  in The Cheesecake Factory on October 6, 2024 and sell it today you would earn a total of  918.00  from holding The Cheesecake Factory or generate 22.78% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Minerals Technologies

The Cheesecake Factory

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 12 (%) 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.

Minerals Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Minerals Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Minerals Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheesecake Factory and Minerals Technologies

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

The idea behind The Cheesecake Factory and Minerals Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.