Correlation Between Cheesecake Factory and Pembina Pipeline

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

Diversification Opportunities for Cheesecake Factory and Pembina Pipeline

0.06

Correlation Coefficient

Cheesecake Factory  Pembina Pipeline

Significant diversification

The 3 months correlation between Cheesecake and Pembina is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Pembina Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Pembina Pipeline

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 12.29 times more return on investment than Pembina Pipeline. However, Cheesecake Factory is 12.29 times more volatile than Pembina Pipeline. It trades about 0.02 of its potential returns per unit of risk. Pembina Pipeline is currently generating about 0.08 per unit of risk. If you would invest  4,781  in The Cheesecake Factory on December 24, 2024 and sell it today you would earn a total of  89.00  from holding The Cheesecake Factory or generate 1.86% 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.  Pembina Pipeline

The Cheesecake Factory

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Cheesecake Factory is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pembina Pipeline

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cheesecake Factory and Pembina Pipeline

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

The idea behind The Cheesecake Factory and Pembina Pipeline 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.