Correlation Between Where Food and Cheesecake Factory

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

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

Diversification Opportunities for Where Food and Cheesecake Factory

0.09

Correlation Coefficient

Where Food  Cheesecake Factory

Significant diversification

The 3 months correlation between Where and Cheesecake is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Where Food Comes 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 Where Food 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 Where Food Comes 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 Where Food i.e., Where Food and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Where Food and Cheesecake Factory

Given the investment horizon of 90 days Where Food Comes is expected to under-perform the Cheesecake Factory. In addition to that, Where Food is 1.21 times more volatile than The Cheesecake Factory. It trades about -0.08 of its total potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.07 per unit of volatility. If you would invest  4,712  in The Cheesecake Factory on December 29, 2024 and sell it today you would earn a total of  397.00  from holding The Cheesecake Factory or generate 8.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Where Food Comes  vs.  The Cheesecake Factory

Where Food Comes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Where Food Comes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

The Cheesecake Factory

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 5 (%) 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 Where Food and Cheesecake Factory

The main advantage of trading using opposite Where Food and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Where Food 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 Where Food Comes 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.