Correlation Between Constellation Brands and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Constellation Brands 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 Constellation Brands and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Brands Class and The Cheesecake Factory, you can compare the effects of market volatilities on Constellation Brands 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 Constellation Brands with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and Cheesecake Factory.
Diversification Opportunities for Constellation Brands and Cheesecake Factory
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Constellation and Cheesecake is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class 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 Constellation Brands 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 Constellation Brands Class 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 Constellation Brands i.e., Constellation Brands and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Constellation Brands and Cheesecake Factory
Considering the 90-day investment horizon Constellation Brands is expected to generate 15.13 times less return on investment than Cheesecake Factory. But when comparing it to its historical volatility, Constellation Brands Class is 1.75 times less risky than Cheesecake Factory. It trades about 0.01 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,211 in The Cheesecake Factory on August 31, 2024 and sell it today you would earn a total of 1,853 from holding The Cheesecake Factory or generate 57.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Brands Class vs. The Cheesecake Factory
Performance |
| Timeline |
| Constellation Brands |
| The Cheesecake Factory |
Constellation Brands and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Brands and Cheesecake Factory
The main advantage of trading using opposite Constellation Brands and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands 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.| Constellation Brands vs. Brown Forman | Constellation Brands vs. Duckhorn Portfolio | Constellation Brands vs. MGP Ingredients | Constellation Brands vs. Brown Forman |
| Cheesecake Factory vs. RLJ Lodging Trust | Cheesecake Factory vs. Aquagold International | Cheesecake Factory vs. Stepstone Group | Cheesecake Factory vs. Morningstar Unconstrained Allocation |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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