Correlation Between Cheesecake Factory and Pool
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
The Cheesecake Factory vs. Pool Corp.
Performance |
Timeline |
The Cheesecake Factory |
Pool |
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.Cheesecake Factory vs. Highway Holdings Limited | Cheesecake Factory vs. QCR Holdings | Cheesecake Factory vs. Partner Communications | Cheesecake Factory vs. Acumen Pharmaceuticals |
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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