Correlation Between RLJ Lodging and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging 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 RLJ Lodging and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLJ Lodging Trust and The Cheesecake Factory, you can compare the effects of market volatilities on RLJ Lodging 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 RLJ Lodging with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Cheesecake Factory.
Diversification Opportunities for RLJ Lodging and Cheesecake Factory
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RLJ and Cheesecake is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust 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 RLJ Lodging 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 RLJ Lodging Trust 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 RLJ Lodging i.e., RLJ Lodging and Cheesecake Factory go up and down completely randomly.
Pair Corralation between RLJ Lodging and Cheesecake Factory
Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the Cheesecake Factory. But the stock apears to be less risky and, when comparing its historical volatility, RLJ Lodging Trust is 1.84 times less risky than Cheesecake Factory. The stock trades about -0.36 of its potential returns per unit of risk. The The Cheesecake Factory is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,310 in The Cheesecake Factory on November 29, 2024 and sell it today you would earn a total of 55.00 from holding The Cheesecake Factory or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. The Cheesecake Factory
Performance |
| Timeline |
| RLJ Lodging Trust |
| The Cheesecake Factory |
RLJ Lodging and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Cheesecake Factory
The main advantage of trading using opposite RLJ Lodging and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging 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.| RLJ Lodging vs. Sunstone Hotel Investors | RLJ Lodging vs. Pebblebrook Hotel Trust | RLJ Lodging vs. Summit Hotel Properties | RLJ Lodging vs. Ryman Hospitality Properties |
| 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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