Correlation Between Biglari Holdings and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Biglari 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 Biglari 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 Biglari Holdings and The Cheesecake Factory, you can compare the effects of market volatilities on Biglari 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 Biglari Holdings with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and Cheesecake Factory.
Diversification Opportunities for Biglari Holdings and Cheesecake Factory
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Biglari and Cheesecake is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings 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 Biglari 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 Biglari Holdings 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 Biglari Holdings i.e., Biglari Holdings and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Biglari Holdings and Cheesecake Factory
Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.06 times more return on investment than Cheesecake Factory. However, Biglari Holdings is 1.06 times more volatile than The Cheesecake Factory. It trades about 0.3 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.19 per unit of risk. If you would invest 17,228 in Biglari Holdings on August 26, 2024 and sell it today you would earn a total of 3,413 from holding Biglari Holdings or generate 19.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biglari Holdings vs. The Cheesecake Factory
Performance |
| Timeline |
| Biglari Holdings |
| The Cheesecake Factory |
Biglari Holdings and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biglari Holdings and Cheesecake Factory
The main advantage of trading using opposite Biglari Holdings and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari 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.The idea behind Biglari Holdings 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.| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |