Correlation Between RCI Hospitality and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both RCI Hospitality 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 RCI Hospitality and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCI Hospitality Holdings and The Cheesecake Factory, you can compare the effects of market volatilities on RCI Hospitality 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 RCI Hospitality with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCI Hospitality and Cheesecake Factory.
Diversification Opportunities for RCI Hospitality and Cheesecake Factory
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RCI and Cheesecake is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings 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 RCI Hospitality 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 RCI Hospitality Holdings 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 RCI Hospitality i.e., RCI Hospitality and Cheesecake Factory go up and down completely randomly.
Pair Corralation between RCI Hospitality and Cheesecake Factory
Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 0.96 times more return on investment than Cheesecake Factory. However, RCI Hospitality Holdings is 1.04 times less risky than Cheesecake Factory. It trades about 0.31 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.22 per unit of risk. If you would invest 4,470 in RCI Hospitality Holdings on August 28, 2024 and sell it today you would earn a total of 851.00 from holding RCI Hospitality Holdings or generate 19.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCI Hospitality Holdings vs. The Cheesecake Factory
Performance |
| Timeline |
| RCI Hospitality Holdings |
| The Cheesecake Factory |
RCI Hospitality and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCI Hospitality and Cheesecake Factory
The main advantage of trading using opposite RCI Hospitality and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality 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.| RCI Hospitality vs. Brinker International | RCI Hospitality vs. Bloomin Brands | RCI Hospitality vs. BJs Restaurants | RCI Hospitality vs. Dennys Corp |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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