Correlation Between Cheesecake Factory and 83001WAC8

Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and 83001WAC8 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 83001WAC8 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 Six Flags Theme, you can compare the effects of market volatilities on Cheesecake Factory and 83001WAC8 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 83001WAC8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and 83001WAC8.

Diversification Opportunities for Cheesecake Factory and 83001WAC8

0.13

Correlation Coefficient

Cheesecake Factory  83001WAC8

Average diversification

The 3 months correlation between Cheesecake and 83001WAC8 is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Six Flags Theme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Theme 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 83001WAC8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Theme has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and 83001WAC8 go up and down completely randomly.

Pair Corralation between Cheesecake Factory and 83001WAC8

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 5.95 times more return on investment than 83001WAC8. However, Cheesecake Factory is 5.95 times more volatile than Six Flags Theme. It trades about 0.09 of its potential returns per unit of risk. Six Flags Theme is currently generating about 0.34 per unit of risk. If you would invest  4,663  in The Cheesecake Factory on September 21, 2024 and sell it today you would earn a total of  190.00  from holding The Cheesecake Factory or generate 4.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

The Cheesecake Factory  vs.  Six Flags Theme

The Cheesecake Factory

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 11 (%) 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.

Six Flags Theme

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Six Flags Theme are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 83001WAC8 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 83001WAC8

The main advantage of trading using opposite Cheesecake Factory and 83001WAC8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, 83001WAC8 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 83001WAC8 will offset losses from the drop in 83001WAC8's long position.

The idea behind The Cheesecake Factory and Six Flags Theme 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.