Correlation Between Cheesecake Factory and First Republic

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

Diversification Opportunities for Cheesecake Factory and First Republic

-0.53

Correlation Coefficient

Cheesecake Factory  First Republic

Excellent diversification

The 3 months correlation between Cheesecake and First is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank 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 First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and First Republic go up and down completely randomly.

Pair Corralation between Cheesecake Factory and First Republic

If you would invest  3,958  in The Cheesecake Factory on September 27, 2024 and sell it today you would earn a total of  893.00  from holding The Cheesecake Factory or generate 22.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

The Cheesecake Factory  vs.  First Republic Bank

The Cheesecake Factory

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 11 (%) 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.

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, First Republic is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Cheesecake Factory and First Republic

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

The idea behind The Cheesecake Factory and First Republic Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.