Correlation Between Cheesecake Factory and HUMANA

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

Diversification Opportunities for Cheesecake Factory and HUMANA

-0.24

Correlation Coefficient

Cheesecake Factory  HUMANA

Very good diversification

The 3 months correlation between Cheesecake and HUMANA is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA 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 HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and HUMANA go up and down completely randomly.

Pair Corralation between Cheesecake Factory and HUMANA

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 3.42 times more return on investment than HUMANA. However, Cheesecake Factory is 3.42 times more volatile than HUMANA INC. It trades about 0.09 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.03 per unit of risk. If you would invest  3,389  in The Cheesecake Factory on October 24, 2024 and sell it today you would earn a total of  1,753  from holding The Cheesecake Factory or generate 51.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.98%
Values	Daily Returns

The Cheesecake Factory  vs.  HUMANA INC

The Cheesecake Factory

Risk-Adjusted Performance

12 of 100

OK

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.

HUMANA INC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheesecake Factory and HUMANA

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

The idea behind The Cheesecake Factory and HUMANA 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.