Correlation Between Yum Brands and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Yum 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 Yum 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 Yum Brands and The Cheesecake Factory, you can compare the effects of market volatilities on Yum 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 Yum Brands with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and Cheesecake Factory.
Diversification Opportunities for Yum Brands and Cheesecake Factory
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Yum and Cheesecake is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands 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 Yum 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 Yum Brands 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 Yum Brands i.e., Yum Brands and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Yum Brands and Cheesecake Factory
Considering the 90-day investment horizon Yum Brands is expected to generate 44.58 times less return on investment than Cheesecake Factory. But when comparing it to its historical volatility, Yum Brands is 2.49 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 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,128 in The Cheesecake Factory on August 24, 2024 and sell it today you would earn a total of 506.00 from holding The Cheesecake Factory or generate 12.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yum Brands vs. The Cheesecake Factory
Performance |
| Timeline |
| Yum Brands |
| The Cheesecake Factory |
Yum Brands and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and Cheesecake Factory
The main advantage of trading using opposite Yum Brands and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum 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.| Yum Brands vs. Shake Shack | Yum Brands vs. Papa Johns International | Yum Brands vs. Dominos Pizza | Yum Brands vs. Jack In The |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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