Correlation Between Wizz Air and Cheesecake Factory

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

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

Diversification Opportunities for Wizz Air and Cheesecake Factory

0.51

Correlation Coefficient

Wizz Air  Cheesecake Factory

Very weak diversification

The 3 months correlation between Wizz and Cheesecake is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Wizz Air Holdings 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 Wizz Air 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 Wizz Air Holdings 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 Wizz Air i.e., Wizz Air and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Wizz Air and Cheesecake Factory

Assuming the 90 days horizon Wizz Air Holdings is expected to under-perform the Cheesecake Factory. In addition to that, Wizz Air is 1.58 times more volatile than The Cheesecake Factory. It trades about -0.12 of its total potential returns per unit of risk. The Cheesecake Factory is currently generating about -0.14 per unit of volatility. 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

Wizz Air Holdings  vs.  The Cheesecake Factory

Wizz Air Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wizz Air Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Wizz Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Wizz Air and Cheesecake Factory

The main advantage of trading using opposite Wizz Air and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wizz Air 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 Wizz Air Holdings 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.