Correlation Between TRAVELERS and Cheesecake Factory

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

By analyzing existing cross correlation between TRAVELERS INC 405 and The Cheesecake Factory, you can compare the effects of market volatilities on TRAVELERS 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 TRAVELERS with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVELERS and Cheesecake Factory.

Diversification Opportunities for TRAVELERS and Cheesecake Factory

-0.36

Correlation Coefficient

TRAVELERS  Cheesecake Factory

Very good diversification

The 3 months correlation between TRAVELERS and Cheesecake is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding TRAVELERS INC 405 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 TRAVELERS 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 TRAVELERS INC 405 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 TRAVELERS i.e., TRAVELERS and Cheesecake Factory go up and down completely randomly.

Pair Corralation between TRAVELERS and Cheesecake Factory

Assuming the 90 days trading horizon TRAVELERS is expected to generate 43.77 times less return on investment than Cheesecake Factory. But when comparing it to its historical volatility, TRAVELERS INC 405 is 2.46 times less risky than Cheesecake Factory. It trades about 0.0 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,825  in The Cheesecake Factory on December 25, 2024 and sell it today you would earn a total of  255.00  from holding The Cheesecake Factory or generate 5.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.33%
Values	Daily Returns

TRAVELERS INC 405  vs.  The Cheesecake Factory

TRAVELERS INC 405

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAVELERS INC 405 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TRAVELERS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

The Cheesecake Factory

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Cheesecake Factory may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TRAVELERS and Cheesecake Factory

The main advantage of trading using opposite TRAVELERS and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVELERS 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 TRAVELERS INC 405 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.