Correlation Between Arm Holdings and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Arm Holdings 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 Arm Holdings and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arm Holdings plc and The Cheesecake Factory, you can compare the effects of market volatilities on Arm Holdings 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 Arm Holdings with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arm Holdings and Cheesecake Factory.
Diversification Opportunities for Arm Holdings and Cheesecake Factory
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Arm and Cheesecake is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc 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 Arm Holdings 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 Arm Holdings plc 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 Arm Holdings i.e., Arm Holdings and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Arm Holdings and Cheesecake Factory
Considering the 90-day investment horizon Arm Holdings plc is expected to generate 2.72 times more return on investment than Cheesecake Factory. However, Arm Holdings is 2.72 times more volatile than The Cheesecake Factory. It trades about 0.21 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.35 per unit of risk. If you would invest 12,820 in Arm Holdings plc on November 3, 2024 and sell it today you would earn a total of 3,135 from holding Arm Holdings plc or generate 24.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arm Holdings plc vs. The Cheesecake Factory
Performance |
| Timeline |
| Arm Holdings plc |
| The Cheesecake Factory |
Arm Holdings and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arm Holdings and Cheesecake Factory
The main advantage of trading using opposite Arm Holdings and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arm Holdings 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.| Arm Holdings vs. Sonos Inc | Arm Holdings vs. United Parks Resorts | Arm Holdings vs. Mattel Inc | Arm Holdings vs. U Haul Holding |
| Cheesecake Factory vs. Dine Brands Global | Cheesecake Factory vs. Bloomin Brands | Cheesecake Factory vs. BJs Restaurants | Cheesecake Factory vs. Brinker International |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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