Correlation Between BJs Restaurants and Shake Shack
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants 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 BJs Restaurants and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Shake Shack, you can compare the effects of market volatilities on BJs Restaurants 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 BJs Restaurants with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Shake Shack.
Diversification Opportunities for BJs Restaurants and Shake Shack
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BJs and Shake is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants i.e., BJs Restaurants and Shake Shack go up and down completely randomly.
Pair Corralation between BJs Restaurants and Shake Shack
Given the investment horizon of 90 days BJs Restaurants is expected to generate 3.59 times less return on investment than Shake Shack. But when comparing it to its historical volatility, BJs Restaurants is 1.07 times less risky than Shake Shack. It trades about 0.02 of its potential returns per unit of risk. Shake Shack is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,971 in Shake Shack on August 24, 2024 and sell it today you would earn a total of 7,330 from holding Shake Shack or generate 147.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. Shake Shack
Performance |
| Timeline |
| BJs Restaurants |
| Shake Shack |
BJs Restaurants and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Shake Shack
The main advantage of trading using opposite BJs Restaurants and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants 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.| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
| Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Eshallgo Class A | Shake Shack vs. Amtech Systems | Shake Shack vs. Gold Fields Ltd |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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