Correlation Between Academy Sports and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Academy Sports and Shake Shack 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 Academy Sports and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Academy Sports Outdoors and Shake Shack, you can compare the effects of market volatilities on Academy Sports and Shake Shack 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 Academy Sports with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Shake Shack.
Diversification Opportunities for Academy Sports and Shake Shack
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Academy and Shake is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Academy Sports 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 Academy Sports Outdoors are associated (or correlated) with Shake Shack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shake Shack has no effect on the direction of Academy Sports i.e., Academy Sports and Shake Shack go up and down completely randomly.
Pair Corralation between Academy Sports and Shake Shack
Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Shake Shack. But the stock apears to be less risky and, when comparing its historical volatility, Academy Sports Outdoors is 1.38 times less risky than Shake Shack. The stock trades about -0.01 of its potential returns per unit of risk. The Shake Shack is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,172 in Shake Shack on September 2, 2024 and sell it today you would earn a total of 7,201 from holding Shake Shack or generate 116.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Academy Sports Outdoors vs. Shake Shack
Performance |
| Timeline |
| Academy Sports Outdoors |
| Shake Shack |
Academy Sports and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Academy Sports and Shake Shack
The main advantage of trading using opposite Academy Sports and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Shake Shack 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 Shake Shack will offset losses from the drop in Shake Shack's long position.| Academy Sports vs. Williams Sonoma | Academy Sports vs. AutoZone | Academy Sports vs. Ulta Beauty | Academy Sports vs. Best Buy Co |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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