Correlation Between Mesa Air and Cheesecake Factory

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

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

Diversification Opportunities for Mesa Air and Cheesecake Factory

-0.48

Correlation Coefficient

Mesa Air  Cheesecake Factory

Very good diversification

The 3 months correlation between Mesa and Cheesecake is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group 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 Mesa Air 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 Mesa Air Group 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 Mesa Air i.e., Mesa Air and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Mesa Air and Cheesecake Factory

Given the investment horizon of 90 days Mesa Air Group is expected to generate 2.24 times more return on investment than Cheesecake Factory. However, Mesa Air is 2.24 times more volatile than The Cheesecake Factory. It trades about 0.39 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.18 per unit of risk. If you would invest  85.00  in Mesa Air Group on September 19, 2024 and sell it today you would earn a total of  35.00  from holding Mesa Air Group or generate 41.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mesa Air Group  vs.  The Cheesecake Factory

Mesa Air Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mesa Air is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Mesa Air and Cheesecake Factory

The main advantage of trading using opposite Mesa Air and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air 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 Mesa Air Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.