Correlation Between Cheesecake Factory and Skechers USA

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

Diversification Opportunities for Cheesecake Factory and Skechers USA

0.25

Correlation Coefficient

Cheesecake Factory  Skechers USA

Modest diversification

The 3 months correlation between Cheesecake and Skechers is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA 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 Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Skechers USA go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Skechers USA

Given the investment horizon of 90 days Cheesecake Factory is expected to generate 1.05 times less return on investment than Skechers USA. In addition to that, Cheesecake Factory is 1.08 times more volatile than Skechers USA. It trades about 0.05 of its total potential returns per unit of risk. Skechers USA is currently generating about 0.06 per unit of volatility. If you would invest  4,322  in Skechers USA on October 5, 2024 and sell it today you would earn a total of  2,407  from holding Skechers USA or generate 55.69% 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.  Skechers USA

The Cheesecake Factory

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 10 (%) 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.

Skechers USA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheesecake Factory and Skechers USA

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

The idea behind The Cheesecake Factory and Skechers USA 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.