Correlation Between Cheesecake Factory and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and LATAM Airlines 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 LATAM Airlines 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 LATAM Airlines Group, you can compare the effects of market volatilities on Cheesecake Factory and LATAM Airlines 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 LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and LATAM Airlines.
Diversification Opportunities for Cheesecake Factory and LATAM Airlines
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cheesecake and LATAM is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and LATAM Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LATAM Airlines Group 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 LATAM Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LATAM Airlines Group has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and LATAM Airlines go up and down completely randomly.
Pair Corralation between Cheesecake Factory and LATAM Airlines
Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.32 times more return on investment than LATAM Airlines. However, Cheesecake Factory is 1.32 times more volatile than LATAM Airlines Group. It trades about 0.37 of its potential returns per unit of risk. LATAM Airlines Group is currently generating about 0.37 per unit of risk. If you would invest 4,850 in The Cheesecake Factory on November 2, 2024 and sell it today you would earn a total of 767.00 from holding The Cheesecake Factory or generate 15.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
The Cheesecake Factory vs. LATAM Airlines Group
Performance |
| Timeline |
| The Cheesecake Factory |
| LATAM Airlines Group |
Cheesecake Factory and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheesecake Factory and LATAM Airlines
The main advantage of trading using opposite Cheesecake Factory and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, LATAM Airlines 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 LATAM Airlines will offset losses from the drop in LATAM Airlines' long position.| Cheesecake Factory vs. Papa Johns International | Cheesecake Factory vs. Darden Restaurants | Cheesecake Factory vs. Yum China Holdings |
| LATAM Airlines vs. EastGroup Properties | LATAM Airlines vs. Marine Products | LATAM Airlines vs. HNI Corp | LATAM Airlines vs. Thor Industries |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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