Correlation Between Cheesecake Factory and GEN Restaurant

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

Diversification Opportunities for Cheesecake Factory and GEN Restaurant

0.28

Correlation Coefficient

Cheesecake Factory  GEN Restaurant

Modest diversification

The 3 months correlation between Cheesecake and GEN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and GEN Restaurant Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant Group, 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 GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group, has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and GEN Restaurant go up and down completely randomly.

Pair Corralation between Cheesecake Factory and GEN Restaurant

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 0.61 times more return on investment than GEN Restaurant. However, The Cheesecake Factory is 1.63 times less risky than GEN Restaurant. It trades about 0.19 of its potential returns per unit of risk. GEN Restaurant Group, is currently generating about 0.0 per unit of risk. If you would invest  3,871  in The Cheesecake Factory on September 3, 2024 and sell it today you would earn a total of  1,193  from holding The Cheesecake Factory or generate 30.82% return on investment over 90 days.

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

The Cheesecake Factory  vs.  GEN Restaurant 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.

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cheesecake Factory and GEN Restaurant

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

The idea behind The Cheesecake Factory and GEN Restaurant 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.