Correlation Between PepsiCo and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both PepsiCo 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 PepsiCo and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and The Cheesecake Factory, you can compare the effects of market volatilities on PepsiCo 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 PepsiCo with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Cheesecake Factory.
Diversification Opportunities for PepsiCo and Cheesecake Factory
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between PepsiCo and Cheesecake is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo 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 PepsiCo 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 PepsiCo 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 PepsiCo i.e., PepsiCo and Cheesecake Factory go up and down completely randomly.
Pair Corralation between PepsiCo and Cheesecake Factory
Considering the 90-day investment horizon PepsiCo is expected to under-perform the Cheesecake Factory. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.16 times less risky than Cheesecake Factory. The stock trades about -0.02 of its potential returns per unit of risk. The The Cheesecake Factory is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,697 in The Cheesecake Factory on September 19, 2024 and sell it today you would earn a total of 342.00 from holding The Cheesecake Factory or generate 7.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. The Cheesecake Factory
Performance |
| Timeline |
| PepsiCo |
| The Cheesecake Factory |
PepsiCo and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Cheesecake Factory
The main advantage of trading using opposite PepsiCo and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo 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.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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