Correlation Between Cheesecake Factory and Biglari Holdings

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

Diversification Opportunities for Cheesecake Factory and Biglari Holdings

0.3

Correlation Coefficient

Cheesecake Factory  Biglari Holdings

Weak diversification

The 3 months correlation between Cheesecake and Biglari is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings 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 Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Biglari Holdings go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Biglari Holdings

Given the investment horizon of 90 days The Cheesecake Factory is expected to under-perform the Biglari Holdings. In addition to that, Cheesecake Factory is 1.23 times more volatile than Biglari Holdings. It trades about -0.13 of its total potential returns per unit of risk. Biglari Holdings is currently generating about -0.01 per unit of volatility. If you would invest  19,841  in Biglari Holdings on February 1, 2024 and sell it today you would lose (130.00) from holding Biglari Holdings or give up 0.66% of portfolio value over 90 days.

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

The Cheesecake Factory  vs.  Biglari Holdings

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.

Biglari Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheesecake Factory and Biglari Holdings

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

The idea behind The Cheesecake Factory and Biglari Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.