Correlation Between Cheesecake Factory and Compass Group
Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and Compass Group 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 Cheesecake Factory and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Cheesecake Factory and Compass Group PLC, you can compare the effects of market volatilities on Cheesecake Factory and Compass Group 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 Cheesecake Factory with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and Compass Group.
Diversification Opportunities for Cheesecake Factory and Compass Group
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cheesecake and Compass is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Cheesecake Factory 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 The Cheesecake Factory are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Compass Group go up and down completely randomly.
Pair Corralation between Cheesecake Factory and Compass Group
Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.32 times more return on investment than Compass Group. However, Cheesecake Factory is 1.32 times more volatile than Compass Group PLC. It trades about 0.07 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.06 per unit of risk. If you would invest 3,211 in The Cheesecake Factory on August 31, 2024 and sell it today you would earn a total of 1,853 from holding The Cheesecake Factory or generate 57.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.56% |
| Values | Daily Returns |
The Cheesecake Factory vs. Compass Group PLC
Performance |
| Timeline |
| The Cheesecake Factory |
| Compass Group PLC |
Cheesecake Factory and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheesecake Factory and Compass Group
The main advantage of trading using opposite Cheesecake Factory and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.| Cheesecake Factory vs. RLJ Lodging Trust | Cheesecake Factory vs. Aquagold International | Cheesecake Factory vs. Stepstone Group | Cheesecake Factory vs. Morningstar Unconstrained Allocation |
| Compass Group vs. The Cheesecake Factory | Compass Group vs. Darden Restaurants | Compass Group vs. Wingstop | Compass Group vs. Dominos Pizza |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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