Correlation Between Cheesecake Factory and MF International

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

Diversification Opportunities for Cheesecake Factory and MF International

-0.12

Correlation Coefficient

Cheesecake Factory  MF International

Good diversification

The 3 months correlation between Cheesecake and MFI is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and mF International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mF International 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 MF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of mF International has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and MF International go up and down completely randomly.

Pair Corralation between Cheesecake Factory and MF International

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 0.57 times more return on investment than MF International. However, The Cheesecake Factory is 1.75 times less risky than MF International. It trades about 0.1 of its potential returns per unit of risk. mF International Limited is currently generating about 0.03 per unit of risk. If you would invest  4,806  in The Cheesecake Factory on September 16, 2024 and sell it today you would earn a total of  181.00  from holding The Cheesecake Factory or generate 3.77% return on investment over 90 days.

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

The Cheesecake Factory  vs.  mF International Limited

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.

mF International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in mF International Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, MF International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheesecake Factory and MF International

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

The idea behind The Cheesecake Factory and mF International Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.