Correlation Between Bassett Furniture and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture 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 Bassett Furniture and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bassett Furniture Industries and The Cheesecake Factory, you can compare the effects of market volatilities on Bassett Furniture 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 Bassett Furniture with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and Cheesecake Factory.
Diversification Opportunities for Bassett Furniture and Cheesecake Factory
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bassett and Cheesecake is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries 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 Bassett Furniture 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 Bassett Furniture Industries 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 Bassett Furniture i.e., Bassett Furniture and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Bassett Furniture and Cheesecake Factory
Given the investment horizon of 90 days Bassett Furniture is expected to generate 1.96 times less return on investment than Cheesecake Factory. But when comparing it to its historical volatility, Bassett Furniture Industries is 1.63 times less risky than Cheesecake Factory. It trades about 0.21 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 4,262 in The Cheesecake Factory on August 30, 2024 and sell it today you would earn a total of 712.00 from holding The Cheesecake Factory or generate 16.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bassett Furniture Industries vs. The Cheesecake Factory
Performance |
| Timeline |
| Bassett Furniture |
| The Cheesecake Factory |
Bassett Furniture and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bassett Furniture and Cheesecake Factory
The main advantage of trading using opposite Bassett Furniture and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture 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.| Bassett Furniture vs. Hooker Furniture | Bassett Furniture vs. Flexsteel Industries | Bassett Furniture vs. Haverty Furniture Companies | Bassett Furniture vs. La Z Boy Incorporated |
| 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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