Correlation Between Life Time and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Life Time 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 Life Time and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Time Group and Shake Shack, you can compare the effects of market volatilities on Life Time 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 Life Time with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Time and Shake Shack.
Diversification Opportunities for Life Time and Shake Shack
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Life and Shake is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Life Time 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 Life Time Group 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 Life Time i.e., Life Time and Shake Shack go up and down completely randomly.
Pair Corralation between Life Time and Shake Shack
Considering the 90-day investment horizon Life Time is expected to generate 2.41 times less return on investment than Shake Shack. But when comparing it to its historical volatility, Life Time Group is 1.02 times less risky than Shake Shack. It trades about 0.03 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 6,875 in Shake Shack on September 3, 2024 and sell it today you would earn a total of 6,498 from holding Shake Shack or generate 94.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Time Group vs. Shake Shack
Performance |
| Timeline |
| Life Time Group |
| Shake Shack |
Life Time and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Time and Shake Shack
The main advantage of trading using opposite Life Time and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Time 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.| Life Time vs. Planet Fitness | Life Time vs. JAKKS Pacific | Life Time vs. Mattel Inc | Life Time vs. OneSpaWorld Holdings |
| 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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