Correlation Between Shake Shack and MF International

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

By analyzing existing cross correlation between Shake Shack and mF International Limited, you can compare the effects of market volatilities on Shake Shack and MF International 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 MF International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and MF International.

Diversification Opportunities for Shake Shack and MF International

-0.08

Correlation Coefficient

Shake Shack  MF International

Good diversification

The 3 months correlation between Shake and MFI is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and mF International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mF International 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 MF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of mF International has no effect on the direction of Shake Shack i.e., Shake Shack and MF International go up and down completely randomly.

Pair Corralation between Shake Shack and MF International

Given the investment horizon of 90 days Shake Shack is expected to generate 0.32 times more return on investment than MF International. However, Shake Shack is 3.14 times less risky than MF International. It trades about 0.19 of its potential returns per unit of risk. mF International Limited is currently generating about 0.04 per unit of risk. If you would invest  10,180  in Shake Shack on September 16, 2024 and sell it today you would earn a total of  2,979  from holding Shake Shack or generate 29.26% return on investment over 90 days.

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

Shake Shack  vs.  mF International Limited

Shake Shack

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Shake Shack disclosed solid returns over the last few months and may actually be approaching a breakup point.

mF International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in mF International Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, MF International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shake Shack and MF International

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

The idea behind Shake Shack and mF International Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.