Correlation Between Cheesecake Factory and Evolution Gaming

Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and Evolution Gaming 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 Evolution Gaming 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 Evolution Gaming Group, you can compare the effects of market volatilities on Cheesecake Factory and Evolution Gaming 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 Evolution Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and Evolution Gaming.

Diversification Opportunities for Cheesecake Factory and Evolution Gaming

-0.77

Correlation Coefficient

Cheesecake Factory  Evolution Gaming

Pay attention - limited upside

The 3 months correlation between Cheesecake and Evolution is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Evolution Gaming Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Gaming 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 Evolution Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Gaming has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Evolution Gaming go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Evolution Gaming

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.0 times more return on investment than Evolution Gaming. However, The Cheesecake Factory is 1.0 times less risky than Evolution Gaming. It trades about 0.2 of its potential returns per unit of risk. Evolution Gaming Group is currently generating about -0.1 per unit of risk. If you would invest  3,737  in The Cheesecake Factory on September 15, 2024 and sell it today you would earn a total of  1,250  from holding The Cheesecake Factory or generate 33.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Cheesecake Factory  vs.  Evolution Gaming Group

The Cheesecake Factory

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Cheesecake Factory exhibited solid returns over the last few months and may actually be approaching a breakup point.

Evolution Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Gaming Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cheesecake Factory and Evolution Gaming

The main advantage of trading using opposite Cheesecake Factory and Evolution Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, Evolution Gaming 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 Evolution Gaming will offset losses from the drop in Evolution Gaming's long position.

The idea behind The Cheesecake Factory and Evolution Gaming Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.