Correlation Between Cheesecake Factory and Wabash National

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

Diversification Opportunities for Cheesecake Factory and Wabash National

0.29

Correlation Coefficient

Cheesecake Factory  Wabash National

Modest diversification

The 3 months correlation between Cheesecake and Wabash is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Wabash National go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Wabash National

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.0 times more return on investment than Wabash National. However, The Cheesecake Factory is 1.0 times less risky than Wabash National. It trades about 0.19 of its potential returns per unit of risk. Wabash National is currently generating about -0.04 per unit of risk. If you would invest  3,848  in The Cheesecake Factory on October 10, 2024 and sell it today you would earn a total of  1,125  from holding The Cheesecake Factory or generate 29.24% 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.  Wabash National

The Cheesecake Factory

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 14 (%) 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.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cheesecake Factory and Wabash National

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

The idea behind The Cheesecake Factory and Wabash National 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.