Correlation Between Compass Group and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Compass Group 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 Compass Group and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Group PLC and The Cheesecake Factory, you can compare the effects of market volatilities on Compass Group 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 Compass Group with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Cheesecake Factory.
Diversification Opportunities for Compass Group and Cheesecake Factory
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Compass and Cheesecake is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC 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 Compass Group 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 Compass Group PLC 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 Compass Group i.e., Compass Group and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Compass Group and Cheesecake Factory
Assuming the 90 days horizon Compass Group is expected to generate 1.27 times less return on investment than Cheesecake Factory. But when comparing it to its historical volatility, Compass Group PLC is 1.76 times less risky than Cheesecake Factory. It trades about 0.2 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,774 in The Cheesecake Factory on September 13, 2024 and sell it today you would earn a total of 275.00 from holding The Cheesecake Factory or generate 5.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Compass Group PLC vs. The Cheesecake Factory
Performance |
| Timeline |
| Compass Group PLC |
| The Cheesecake Factory |
Compass Group and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Cheesecake Factory
The main advantage of trading using opposite Compass Group and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group 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.| Compass Group vs. Bunzl plc | Compass Group vs. Associated British Foods | Compass Group vs. Coloplast A | Compass Group vs. Experian plc PK |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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