Correlation Between Waters and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Waters 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 Waters and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waters and The Cheesecake Factory, you can compare the effects of market volatilities on Waters 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 Waters with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Cheesecake Factory.
Diversification Opportunities for Waters and Cheesecake Factory
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waters and Cheesecake is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Waters 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 Waters 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 Waters 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 Waters i.e., Waters and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Waters and Cheesecake Factory
Considering the 90-day investment horizon Waters is expected to generate 1.05 times less return on investment than Cheesecake Factory. But when comparing it to its historical volatility, Waters is 1.01 times less risky than Cheesecake Factory. It trades about 0.07 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waters vs. The Cheesecake Factory
Performance |
| Timeline |
| Waters |
| The Cheesecake Factory |
Waters and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waters and Cheesecake Factory
The main advantage of trading using opposite Waters and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters 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.| Waters vs. IDEXX Laboratories | Waters vs. IQVIA Holdings | Waters vs. Charles River Laboratories | Waters vs. Revvity |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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