Correlation Between Grocery Outlet and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Grocery Outlet 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 Grocery Outlet and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grocery Outlet Holding and Shake Shack, you can compare the effects of market volatilities on Grocery Outlet 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 Grocery Outlet with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and Shake Shack.
Diversification Opportunities for Grocery Outlet and Shake Shack
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Grocery and Shake is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and Shake Shack go up and down completely randomly.
Pair Corralation between Grocery Outlet and Shake Shack
Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Shake Shack. But the stock apears to be less risky and, when comparing its historical volatility, Grocery Outlet Holding is 1.16 times less risky than Shake Shack. The stock trades about -0.02 of its potential returns per unit of risk. The Shake Shack is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,925 in Shake Shack on September 3, 2024 and sell it today you would earn a total of 8,448 from holding Shake Shack or generate 171.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grocery Outlet Holding vs. Shake Shack
Performance |
| Timeline |
| Grocery Outlet Holding |
| Shake Shack |
Grocery Outlet and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grocery Outlet and Shake Shack
The main advantage of trading using opposite Grocery Outlet and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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.| Grocery Outlet vs. Natural Grocers by | Grocery Outlet vs. Village Super Market | Grocery Outlet vs. Ingles Markets Incorporated | Grocery Outlet vs. Ocado Group plc |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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