Correlation Between Shake Shack and CAVA Group,

Can any of the company-specific risk be diversified away by investing in both Shake Shack and CAVA Group, 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 Shake Shack and CAVA Group, into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shake Shack and CAVA Group,, you can compare the effects of market volatilities on Shake Shack and CAVA Group, 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 Shake Shack with a short position of CAVA Group,. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and CAVA Group,.

Diversification Opportunities for Shake Shack and CAVA Group,

0.85

Correlation Coefficient

Shake Shack  CAVA Group,

Very poor diversification

The 3 months correlation between Shake and CAVA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and CAVA Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAVA Group, and Shake Shack 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 Shake Shack are associated (or correlated) with CAVA Group,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAVA Group, has no effect on the direction of Shake Shack i.e., Shake Shack and CAVA Group, go up and down completely randomly.

Pair Corralation between Shake Shack and CAVA Group,

Given the investment horizon of 90 days Shake Shack is expected to generate 1.13 times more return on investment than CAVA Group,. However, Shake Shack is 1.13 times more volatile than CAVA Group,. It trades about 0.23 of its potential returns per unit of risk. CAVA Group, is currently generating about 0.2 per unit of risk. If you would invest  9,776  in Shake Shack on August 31, 2024 and sell it today you would earn a total of  3,459  from holding Shake Shack or generate 35.38% return on investment over 90 days.

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

Shake Shack  vs.  CAVA Group,

Shake Shack

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Shake Shack disclosed solid returns over the last few months and may actually be approaching a breakup point.

CAVA Group,

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CAVA Group, are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, CAVA Group, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shake Shack and CAVA Group,

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

The idea behind Shake Shack and CAVA Group, 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.