Correlation Between WW International and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both WW International 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 WW International and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW International and The Cheesecake Factory, you can compare the effects of market volatilities on WW International 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 WW International with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW International and Cheesecake Factory.
Diversification Opportunities for WW International and Cheesecake Factory
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WW International and Cheesecake is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding WW International 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 WW International 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 WW International 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 WW International i.e., WW International and Cheesecake Factory go up and down completely randomly.
Pair Corralation between WW International and Cheesecake Factory
Allowing for the 90-day total investment horizon WW International is expected to generate 1.5 times less return on investment than Cheesecake Factory. In addition to that, WW International is 4.13 times more volatile than The Cheesecake Factory. It trades about 0.02 of its total potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.12 per unit of volatility. If you would invest 3,729 in The Cheesecake Factory on September 7, 2024 and sell it today you would earn a total of 1,314 from holding The Cheesecake Factory or generate 35.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WW International vs. The Cheesecake Factory
Performance |
| Timeline |
| WW International |
| The Cheesecake Factory |
WW International and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WW International and Cheesecake Factory
The main advantage of trading using opposite WW International and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW International 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.| WW International vs. HR Block | WW International vs. Service International | WW International vs. Rollins | WW International vs. Carriage Services |
| Cheesecake Factory vs. Kodiak Sciences | Cheesecake Factory vs. Coherent | Cheesecake Factory vs. Petrleo Brasileiro SA | Cheesecake Factory vs. Kimberly Clark |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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