Correlation Between Cheesecake Factory and Ruths Hospitality

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

Diversification Opportunities for Cheesecake Factory and Ruths Hospitality

0.84

Correlation Coefficient

Cheesecake Factory  Ruths Hospitality

Very poor diversification

The 3 months correlation between Cheesecake and Ruths is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Ruths Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruths Hospitality 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 Ruths Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruths Hospitality has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Ruths Hospitality go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Ruths Hospitality

If you would invest  3,909  in The Cheesecake Factory on August 30, 2024 and sell it today you would earn a total of  1,065  from holding The Cheesecake Factory or generate 27.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

The Cheesecake Factory  vs.  Ruths Hospitality Group

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.

Ruths Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruths Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Ruths Hospitality is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cheesecake Factory and Ruths Hospitality

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

The idea behind The Cheesecake Factory and Ruths Hospitality Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..