Correlation Between Fast Retailing and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Shake Shack, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Shake Shack.
Diversification Opportunities for Fast Retailing and Shake Shack
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fast and Shake is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Shake Shack go up and down completely randomly.
Pair Corralation between Fast Retailing and Shake Shack
Assuming the 90 days horizon Fast Retailing is expected to generate 1.47 times less return on investment than Shake Shack. But when comparing it to its historical volatility, Fast Retailing Co is 1.06 times less risky than Shake Shack. It trades about 0.08 of its potential returns per unit of risk. Shake Shack is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9,659 in Shake Shack on September 3, 2024 and sell it today you would earn a total of 3,714 from holding Shake Shack or generate 38.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Shake Shack
Performance |
| Timeline |
| Fast Retailing |
| Shake Shack |
Fast Retailing and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Shake Shack
The main advantage of trading using opposite Fast Retailing and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
| Shake Shack vs. Highway Holdings Limited | Shake Shack vs. QCR Holdings | Shake Shack vs. Partner Communications | Shake Shack vs. Acumen Pharmaceuticals |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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