Correlation Between Iris Energy and Cheesecake Factory

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Can any of the company-specific risk be diversified away by investing in both Iris Energy 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 Iris Energy and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iris Energy and The Cheesecake Factory, you can compare the effects of market volatilities on Iris Energy 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 Iris Energy with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iris Energy and Cheesecake Factory.

Diversification Opportunities for Iris Energy and Cheesecake Factory

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Iris and Cheesecake is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Iris Energy 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 Iris Energy 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 Iris Energy 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 Iris Energy i.e., Iris Energy and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Iris Energy and Cheesecake Factory

Given the investment horizon of 90 days Iris Energy is expected to generate 3.48 times more return on investment than Cheesecake Factory. However, Iris Energy is 3.48 times more volatile than The Cheesecake Factory. It trades about 0.11 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.14 per unit of risk. If you would invest  925.00  in Iris Energy on September 25, 2024 and sell it today you would earn a total of  255.00  from holding Iris Energy or generate 27.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Iris Energy  vs.  The Cheesecake Factory

 Performance 
       Timeline  
Iris Energy 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Iris Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Iris Energy displayed solid returns over the last few months and may actually be approaching a breakup point.
The Cheesecake Factory 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 10 (%) 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.

Iris Energy and Cheesecake Factory Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Iris Energy and Cheesecake Factory

The main advantage of trading using opposite Iris Energy and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iris Energy 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 Iris Energy 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.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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