Correlation Between Lizhan Environmental and Cheesecake Factory

Can any of the company-specific risk be diversified away by investing in both Lizhan Environmental and Cheesecake Factory 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 Lizhan Environmental and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lizhan Environmental and The Cheesecake Factory, you can compare the effects of market volatilities on Lizhan Environmental and Cheesecake Factory 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 Lizhan Environmental with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lizhan Environmental and Cheesecake Factory.

Diversification Opportunities for Lizhan Environmental and Cheesecake Factory

0.0

Correlation Coefficient

Lizhan Environmental  Cheesecake Factory

Pay attention - limited upside

The 3 months correlation between Lizhan and Cheesecake is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lizhan Environmental and The Cheesecake Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Cheesecake Factory and Lizhan Environmental 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 Lizhan Environmental are associated (or correlated) with Cheesecake Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Cheesecake Factory has no effect on the direction of Lizhan Environmental i.e., Lizhan Environmental and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Lizhan Environmental and Cheesecake Factory

If you would invest  4,721  in The Cheesecake Factory on December 21, 2024 and sell it today you would earn a total of  122.00  from holding The Cheesecake Factory or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Lizhan Environmental  vs.  The Cheesecake Factory

Lizhan Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lizhan Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lizhan Environmental is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

The Cheesecake Factory

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Cheesecake Factory is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lizhan Environmental and Cheesecake Factory

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

The idea behind Lizhan Environmental and The Cheesecake Factory 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.