Correlation Between HNI Corp and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both HNI Corp 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 HNI Corp and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HNI Corp and The Cheesecake Factory, you can compare the effects of market volatilities on HNI Corp 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 HNI Corp with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNI Corp and Cheesecake Factory.
Diversification Opportunities for HNI Corp and Cheesecake Factory
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HNI and Cheesecake is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp 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 HNI Corp 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 HNI Corp 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 HNI Corp i.e., HNI Corp and Cheesecake Factory go up and down completely randomly.
Pair Corralation between HNI Corp and Cheesecake Factory
Considering the 90-day investment horizon HNI Corp is expected to generate 1.19 times less return on investment than Cheesecake Factory. But when comparing it to its historical volatility, HNI Corp is 1.29 times less risky than Cheesecake Factory. It trades about 0.11 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,902 in The Cheesecake Factory on September 3, 2024 and sell it today you would earn a total of 1,162 from holding The Cheesecake Factory or generate 29.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HNI Corp vs. The Cheesecake Factory
Performance |
| Timeline |
| HNI Corp |
| The Cheesecake Factory |
HNI Corp and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HNI Corp and Cheesecake Factory
The main advantage of trading using opposite HNI Corp and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp 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.The idea behind HNI Corp and The Cheesecake Factory 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.| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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