Correlation Between Shake Shack and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Shake Shack 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 Shake Shack and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and The Cheesecake Factory, you can compare the effects of market volatilities on Shake Shack 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 Shake Shack with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Cheesecake Factory.
Diversification Opportunities for Shake Shack and Cheesecake Factory
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shake and Cheesecake is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack 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 Shake Shack 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 Shake Shack 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 Shake Shack i.e., Shake Shack and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Shake Shack and Cheesecake Factory
Given the investment horizon of 90 days Shake Shack is expected to under-perform the Cheesecake Factory. In addition to that, Shake Shack is 1.3 times more volatile than The Cheesecake Factory. It trades about -0.33 of its total potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.11 per unit of volatility. If you would invest 4,747 in The Cheesecake Factory on October 23, 2024 and sell it today you would earn a total of 129.00 from holding The Cheesecake Factory or generate 2.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. The Cheesecake Factory
Performance |
| Timeline |
| Shake Shack |
| The Cheesecake Factory |
Shake Shack and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Cheesecake Factory
The main advantage of trading using opposite Shake Shack and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack 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.| Shake Shack vs. Dominos Pizza Common | Shake Shack vs. Papa Johns International | Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Darden Restaurants |
| 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.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |