Correlation Between Gold Fields and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Gold Fields 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 Gold Fields and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and Shake Shack, you can compare the effects of market volatilities on Gold Fields 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 Gold Fields with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Shake Shack.
Diversification Opportunities for Gold Fields and Shake Shack
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gold and Shake is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and Shake Shack go up and down completely randomly.
Pair Corralation between Gold Fields and Shake Shack
Considering the 90-day investment horizon Gold Fields Ltd is expected to under-perform the Shake Shack. In addition to that, Gold Fields is 1.07 times more volatile than Shake Shack. It trades about -0.22 of its total potential returns per unit of risk. Shake Shack is currently generating about 0.22 per unit of volatility. If you would invest 11,426 in Shake Shack on August 28, 2024 and sell it today you would earn a total of 1,516 from holding Shake Shack or generate 13.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. Shake Shack
Performance |
| Timeline |
| Gold Fields |
| Shake Shack |
Gold Fields and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and Shake Shack
The main advantage of trading using opposite Gold Fields and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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 Gold Fields Ltd 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. Dominos Pizza | Shake Shack vs. Papa Johns International | Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Darden Restaurants |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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