Correlation Between Cheesecake Factory and Noble Romans

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

Diversification Opportunities for Cheesecake Factory and Noble Romans

0.08

Correlation Coefficient

Cheesecake Factory  Noble Romans

Significant diversification

The 3 months correlation between Cheesecake and Noble is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Noble Romans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble Romans 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 Noble Romans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble Romans has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Noble Romans go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Noble Romans

Given the investment horizon of 90 days Cheesecake Factory is expected to generate 5.65 times less return on investment than Noble Romans. But when comparing it to its historical volatility, The Cheesecake Factory is 5.06 times less risky than Noble Romans. It trades about 0.07 of its potential returns per unit of risk. Noble Romans is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Noble Romans on October 21, 2024 and sell it today you would earn a total of  4.00  from holding Noble Romans or generate 11.11% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Noble Romans

The Cheesecake Factory

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 8 (%) 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.

Noble Romans

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Noble Romans are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Noble Romans displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheesecake Factory and Noble Romans

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

The idea behind The Cheesecake Factory and Noble Romans 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.