Correlation Between Cedar Fair and Cheesecake Factory

Can any of the company-specific risk be diversified away by investing in both Cedar Fair and Cheesecake Factory 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 Cedar Fair and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cedar Fair LP and The Cheesecake Factory, you can compare the effects of market volatilities on Cedar Fair and Cheesecake Factory 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 Cedar Fair with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cedar Fair and Cheesecake Factory.

Diversification Opportunities for Cedar Fair and Cheesecake Factory

0.48

Correlation Coefficient

Cedar Fair  Cheesecake Factory

Very weak diversification

The 3 months correlation between Cedar and Cheesecake is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cedar Fair LP and The Cheesecake Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Cheesecake Factory and Cedar Fair 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 Cedar Fair LP are associated (or correlated) with Cheesecake Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Cheesecake Factory has no effect on the direction of Cedar Fair i.e., Cedar Fair and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Cedar Fair and Cheesecake Factory

Considering the 90-day investment horizon Cedar Fair LP is expected to under-perform the Cheesecake Factory. But the stock apears to be less risky and, when comparing its historical volatility, Cedar Fair LP is 1.36 times less risky than Cheesecake Factory. The stock trades about -0.29 of its potential returns per unit of risk. The The Cheesecake Factory is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  3,660  in The Cheesecake Factory on February 1, 2024 and sell it today you would lose (208.00) from holding The Cheesecake Factory or give up 5.68% of portfolio value over 90 days.

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

Cedar Fair LP  vs.  The Cheesecake Factory

Cedar Fair LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cedar Fair LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cedar Fair is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

The Cheesecake Factory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Cheesecake Factory has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Cedar Fair and Cheesecake Factory

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

The idea behind Cedar Fair LP and The Cheesecake Factory 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.