Correlation Between Cheesecake Factory and Nasdaq

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

Diversification Opportunities for Cheesecake Factory and Nasdaq

0.87

Correlation Coefficient

Cheesecake Factory  Nasdaq

Very poor diversification

The 3 months correlation between Cheesecake and Nasdaq is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Nasdaq go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Nasdaq

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.73 times more return on investment than Nasdaq. However, Cheesecake Factory is 1.73 times more volatile than Nasdaq Inc. It trades about -0.04 of its potential returns per unit of risk. Nasdaq Inc is currently generating about -0.13 per unit of risk. If you would invest  5,078  in The Cheesecake Factory on October 11, 2024 and sell it today you would lose (105.00) from holding The Cheesecake Factory or give up 2.07% of portfolio value over 90 days.

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

The Cheesecake Factory  vs.  Nasdaq Inc

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.

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cheesecake Factory and Nasdaq

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

The idea behind The Cheesecake Factory and Nasdaq Inc 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.