Correlation Between Cheesecake Factory and Playa Hotels

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

Diversification Opportunities for Cheesecake Factory and Playa Hotels

0.67

Correlation Coefficient

Cheesecake Factory  Playa Hotels

Poor diversification

The 3 months correlation between Cheesecake and Playa is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Playa Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playa Hotels Resorts 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 Playa Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playa Hotels Resorts has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Playa Hotels go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Playa Hotels

Given the investment horizon of 90 days Cheesecake Factory is expected to generate 15.0 times less return on investment than Playa Hotels. But when comparing it to its historical volatility, The Cheesecake Factory is 3.09 times less risky than Playa Hotels. It trades about 0.05 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  988.00  in Playa Hotels Resorts on October 8, 2024 and sell it today you would earn a total of  278.00  from holding Playa Hotels Resorts or generate 28.14% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Playa Hotels Resorts

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.

Playa Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Playa Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheesecake Factory and Playa Hotels

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

The idea behind The Cheesecake Factory and Playa Hotels Resorts 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 Commodity Directory module to find actively traded commodities issued by global exchanges.