Correlation Between First Watch and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both First Watch 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 First Watch and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Watch Restaurant and The Cheesecake Factory, you can compare the effects of market volatilities on First Watch 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 First Watch with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Cheesecake Factory.
Diversification Opportunities for First Watch and Cheesecake Factory
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Cheesecake is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant 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 First Watch 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 First Watch Restaurant 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 First Watch i.e., First Watch and Cheesecake Factory go up and down completely randomly.
Pair Corralation between First Watch and Cheesecake Factory
Given the investment horizon of 90 days First Watch is expected to generate 1.26 times less return on investment than Cheesecake Factory. In addition to that, First Watch is 1.49 times more volatile than The Cheesecake Factory. It trades about 0.19 of its total potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.35 per unit of volatility. If you would invest 4,850 in The Cheesecake Factory on November 3, 2024 and sell it today you would earn a total of 765.00 from holding The Cheesecake Factory or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Watch Restaurant vs. The Cheesecake Factory
Performance |
| Timeline |
| First Watch Restaurant |
| The Cheesecake Factory |
First Watch and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Watch and Cheesecake Factory
The main advantage of trading using opposite First Watch and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch 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.| First Watch vs. Dine Brands Global | First Watch vs. Bloomin Brands | First Watch vs. BJs Restaurants | First Watch vs. The Cheesecake Factory |
| Cheesecake Factory vs. Dine Brands Global | Cheesecake Factory vs. Bloomin Brands | Cheesecake Factory vs. BJs Restaurants | Cheesecake Factory vs. Brinker International |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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