Correlation Between Park Hotels and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Park Hotels 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 Park Hotels and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Park Hotels Resorts and Shake Shack, you can compare the effects of market volatilities on Park Hotels 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 Park Hotels with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Hotels and Shake Shack.
Diversification Opportunities for Park Hotels and Shake Shack
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Park and Shake is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Park Hotels 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 Park Hotels Resorts 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 Park Hotels i.e., Park Hotels and Shake Shack go up and down completely randomly.
Pair Corralation between Park Hotels and Shake Shack
Allowing for the 90-day total investment horizon Park Hotels is expected to generate 2.07 times less return on investment than Shake Shack. But when comparing it to its historical volatility, Park Hotels Resorts is 1.46 times less risky than Shake Shack. It trades about 0.06 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 5,556 in Shake Shack on August 24, 2024 and sell it today you would earn a total of 6,745 from holding Shake Shack or generate 121.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Park Hotels Resorts vs. Shake Shack
Performance |
| Timeline |
| Park Hotels Resorts |
| Shake Shack |
Park Hotels and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Park Hotels and Shake Shack
The main advantage of trading using opposite Park Hotels and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels 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.| Park Hotels vs. Diamondrock Hospitality | Park Hotels vs. Ryman Hospitality Properties | Park Hotels vs. Pebblebrook Hotel Trust | Park Hotels vs. RLJ Lodging Trust |
| Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Eshallgo Class A | Shake Shack vs. Amtech Systems | Shake Shack vs. Gold Fields Ltd |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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