Correlation Between Restaurant Brands and Cheesecake Factory

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

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

Diversification Opportunities for Restaurant Brands and Cheesecake Factory

0.37

Correlation Coefficient

Restaurant Brands  Cheesecake Factory

Weak diversification

The 3 months correlation between Restaurant and Cheesecake is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa 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 Restaurant Brands 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Restaurant Brands and Cheesecake Factory

If you would invest  3,932  in The Cheesecake Factory on October 9, 2024 and sell it today you would earn a total of  1,094  from holding The Cheesecake Factory or generate 27.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.64%
Values	Daily Returns

Restaurant Brands Internationa  vs.  The Cheesecake Factory

Restaurant Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Restaurant Brands and Cheesecake Factory

The main advantage of trading using opposite Restaurant Brands and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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 Restaurant Brands International 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.