Correlation Between Cheesecake Factory and HEALTHPEAK

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

Diversification Opportunities for Cheesecake Factory and HEALTHPEAK

-0.55

Correlation Coefficient

Cheesecake Factory  HEALTHPEAK

Excellent diversification

The 3 months correlation between Cheesecake and HEALTHPEAK is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and HEALTHPEAK PROPERTIES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHPEAK PROPERTIES INC 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 HEALTHPEAK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHPEAK PROPERTIES INC has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and HEALTHPEAK go up and down completely randomly.

Pair Corralation between Cheesecake Factory and HEALTHPEAK

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 4.32 times more return on investment than HEALTHPEAK. However, Cheesecake Factory is 4.32 times more volatile than HEALTHPEAK PROPERTIES INC. It trades about 0.13 of its potential returns per unit of risk. HEALTHPEAK PROPERTIES INC is currently generating about -0.04 per unit of risk. If you would invest  3,991  in The Cheesecake Factory on September 25, 2024 and sell it today you would earn a total of  846.00  from holding The Cheesecake Factory or generate 21.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.06%
Values	Daily Returns

The Cheesecake Factory  vs.  HEALTHPEAK PROPERTIES INC

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.

HEALTHPEAK PROPERTIES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEALTHPEAK PROPERTIES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HEALTHPEAK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheesecake Factory and HEALTHPEAK

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

The idea behind The Cheesecake Factory and HEALTHPEAK PROPERTIES INC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.