Correlation Between Cheesecake Factory and Pool

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Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and Pool 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 Pool 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 Pool Corporation, you can compare the effects of market volatilities on Cheesecake Factory and Pool 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 Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and Pool.

Diversification Opportunities for Cheesecake Factory and Pool

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cheesecake and Pool is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool 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 Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Pool go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Pool

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.08 times more return on investment than Pool. However, Cheesecake Factory is 1.08 times more volatile than Pool Corporation. It trades about 0.05 of its potential returns per unit of risk. Pool Corporation is currently generating about 0.02 per unit of risk. If you would invest  3,189  in The Cheesecake Factory on September 3, 2024 and sell it today you would earn a total of  1,875  from holding The Cheesecake Factory or generate 58.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Cheesecake Factory  vs.  Pool Corp.

 Performance 
       Timeline  
The Cheesecake Factory 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Cheesecake Factory exhibited solid returns over the last few months and may actually be approaching a breakup point.
Pool 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Pool Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Pool may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cheesecake Factory and Pool Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cheesecake Factory and Pool

The main advantage of trading using opposite Cheesecake Factory and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, Pool 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 Pool will offset losses from the drop in Pool's long position.
The idea behind The Cheesecake Factory and Pool Corporation 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.
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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