Correlation Between Cheesecake Factory and United Parks

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

Diversification Opportunities for Cheesecake Factory and United Parks

0.2

Correlation Coefficient

Cheesecake Factory  United Parks

Modest diversification

The 3 months correlation between Cheesecake and United is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and United Parks go up and down completely randomly.

Pair Corralation between Cheesecake Factory and United Parks

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.0 times more return on investment than United Parks. However, Cheesecake Factory is 1.0 times more volatile than United Parks Resorts. It trades about 0.05 of its potential returns per unit of risk. United Parks Resorts is currently generating about -0.12 per unit of risk. If you would invest  4,712  in The Cheesecake Factory on December 30, 2024 and sell it today you would earn a total of  256.00  from holding The Cheesecake Factory or generate 5.43% return on investment over 90 days.

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

The Cheesecake Factory  vs.  United Parks Resorts

The Cheesecake Factory

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Cheesecake Factory may actually be approaching a critical reversion point that can send shares even higher in April 2025.

United Parks Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Parks Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cheesecake Factory and United Parks

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

The idea behind The Cheesecake Factory and United Parks 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.