Correlation Between Gap, and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Gap, 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 Gap, and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Gap, and Shake Shack, you can compare the effects of market volatilities on Gap, 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 Gap, with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Shake Shack.
Diversification Opportunities for Gap, and Shake Shack
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gap, and Shake is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Shake Shack go up and down completely randomly.
Pair Corralation between Gap, and Shake Shack
Considering the 90-day investment horizon Gap, is expected to generate 2.21 times less return on investment than Shake Shack. In addition to that, Gap, is 1.11 times more volatile than Shake Shack. It trades about 0.04 of its total potential returns per unit of risk. Shake Shack is currently generating about 0.1 per unit of volatility. If you would invest 7,168 in Shake Shack on September 12, 2024 and sell it today you would earn a total of 6,649 from holding Shake Shack or generate 92.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Gap, vs. Shake Shack
Performance |
| Timeline |
| Gap, |
| Shake Shack |
Gap, and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap, and Shake Shack
The main advantage of trading using opposite Gap, and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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.The idea behind The Gap, and Shake Shack 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.| Shake Shack vs. Noble Romans | Shake Shack vs. Flanigans Enterprises | Shake Shack vs. FAT Brands | Shake Shack vs. El Pollo Loco |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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