Correlation Between Playa Hotels and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Playa 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 Playa 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 Playa Hotels Resorts and Shake Shack, you can compare the effects of market volatilities on Playa 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 Playa Hotels with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Shake Shack.
Diversification Opportunities for Playa Hotels and Shake Shack
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Playa and Shake is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Playa 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 Playa 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 Playa 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 Playa Hotels i.e., Playa Hotels and Shake Shack go up and down completely randomly.
Pair Corralation between Playa Hotels and Shake Shack
Given the investment horizon of 90 days Playa Hotels is expected to generate 1.97 times less return on investment than Shake Shack. But when comparing it to its historical volatility, Playa Hotels Resorts is 1.56 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 4,971 in Shake Shack on August 24, 2024 and sell it today you would earn a total of 7,330 from holding Shake Shack or generate 147.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Playa Hotels Resorts vs. Shake Shack
Performance |
| Timeline |
| Playa Hotels Resorts |
| Shake Shack |
Playa Hotels and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playa Hotels and Shake Shack
The main advantage of trading using opposite Playa Hotels and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa 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.| Playa Hotels vs. Golden Entertainment | Playa Hotels vs. Red Rock Resorts | Playa Hotels vs. Century Casinos | Playa Hotels vs. Ballys Corp |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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