Correlation Between Cheesecake Factory and Bloomin Brands

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

Diversification Opportunities for Cheesecake Factory and Bloomin Brands

0.67

Correlation Coefficient

Cheesecake Factory  Bloomin Brands

Poor diversification

The 3 months correlation between Cheesecake and Bloomin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Bloomin Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloomin Brands 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 Bloomin Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloomin Brands has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Bloomin Brands go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Bloomin Brands

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 0.57 times more return on investment than Bloomin Brands. However, The Cheesecake Factory is 1.75 times less risky than Bloomin Brands. It trades about -0.02 of its potential returns per unit of risk. Bloomin Brands is currently generating about -0.1 per unit of risk. If you would invest  4,871  in The Cheesecake Factory on January 15, 2025 and sell it today you would lose (263.00) from holding The Cheesecake Factory or give up 5.4% of portfolio value over 90 days.

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

The Cheesecake Factory  vs.  Bloomin Brands

The Cheesecake Factory

Risk-Adjusted Performance

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.

Bloomin Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cheesecake Factory and Bloomin Brands

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

The idea behind The Cheesecake Factory and Bloomin Brands 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.