Correlation Between Shake Shack and 17305HAA6

Can any of the company-specific risk be diversified away by investing in both Shake Shack and 17305HAA6 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 17305HAA6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shake Shack and C 7625 01 DEC 36, you can compare the effects of market volatilities on Shake Shack and 17305HAA6 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 17305HAA6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and 17305HAA6.

Diversification Opportunities for Shake Shack and 17305HAA6

-0.19

Correlation Coefficient

Shake Shack  17305HAA6

Good diversification

The 3 months correlation between Shake and 17305HAA6 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and C 7625 01 DEC 36 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C 7625 01 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 17305HAA6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C 7625 01 has no effect on the direction of Shake Shack i.e., Shake Shack and 17305HAA6 go up and down completely randomly.

Pair Corralation between Shake Shack and 17305HAA6

Given the investment horizon of 90 days Shake Shack is expected to generate 1.34 times more return on investment than 17305HAA6. However, Shake Shack is 1.34 times more volatile than C 7625 01 DEC 36. It trades about 0.16 of its potential returns per unit of risk. C 7625 01 DEC 36 is currently generating about -0.1 per unit of risk. If you would invest  10,415  in Shake Shack on September 24, 2024 and sell it today you would earn a total of  2,535  from holding Shake Shack or generate 24.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.15%
Values	Daily Returns

Shake Shack  vs.  C 7625 01 DEC 36

Shake Shack

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 12 (%) 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.

C 7625 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days C 7625 01 DEC 36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for C 7625 01 DEC 36 investors.

Pair Trading with Shake Shack and 17305HAA6

The main advantage of trading using opposite Shake Shack and 17305HAA6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, 17305HAA6 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 17305HAA6 will offset losses from the drop in 17305HAA6's long position.

The idea behind Shake Shack and C 7625 01 DEC 36 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.