Correlation Between Cheesecake Factory and Pet Acquisition

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Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and Pet Acquisition 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 Cheesecake Factory and Pet Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Cheesecake Factory and Pet Acquisition LLC, you can compare the effects of market volatilities on Cheesecake Factory and Pet Acquisition 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 Cheesecake Factory with a short position of Pet Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and Pet Acquisition.

Diversification Opportunities for Cheesecake Factory and Pet Acquisition

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Cheesecake and Pet is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Pet Acquisition LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pet Acquisition LLC and Cheesecake Factory 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 The Cheesecake Factory are associated (or correlated) with Pet Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pet Acquisition LLC has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Pet Acquisition go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Pet Acquisition

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 0.62 times more return on investment than Pet Acquisition. However, The Cheesecake Factory is 1.6 times less risky than Pet Acquisition. It trades about 0.02 of its potential returns per unit of risk. Pet Acquisition LLC is currently generating about -0.09 per unit of risk. If you would invest  3,304  in The Cheesecake Factory on December 29, 2023 and sell it today you would earn a total of  333.00  from holding The Cheesecake Factory or generate 10.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Cheesecake Factory  vs.  Pet Acquisition LLC

 Performance 
       Timeline  
The Cheesecake Factory 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Cheesecake Factory is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Pet Acquisition LLC 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Pet Acquisition LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cheesecake Factory and Pet Acquisition Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cheesecake Factory and Pet Acquisition

The main advantage of trading using opposite Cheesecake Factory and Pet Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, Pet Acquisition 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 Pet Acquisition will offset losses from the drop in Pet Acquisition's long position.
The idea behind The Cheesecake Factory and Pet Acquisition LLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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