Correlation Between RCS MediaGroup and Shake Shack
Can any of the company-specific risk be diversified away by investing in both RCS MediaGroup 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 RCS MediaGroup and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCS MediaGroup SpA and Shake Shack, you can compare the effects of market volatilities on RCS MediaGroup 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 RCS MediaGroup with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCS MediaGroup and Shake Shack.
Diversification Opportunities for RCS MediaGroup and Shake Shack
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RCS and Shake is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and RCS MediaGroup 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 RCS MediaGroup SpA 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 RCS MediaGroup i.e., RCS MediaGroup and Shake Shack go up and down completely randomly.
Pair Corralation between RCS MediaGroup and Shake Shack
Assuming the 90 days horizon RCS MediaGroup is expected to generate 2.72 times less return on investment than Shake Shack. But when comparing it to its historical volatility, RCS MediaGroup SpA is 1.73 times less risky than Shake Shack. It trades about 0.14 of its potential returns per unit of risk. Shake Shack is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 9,925 in Shake Shack on September 4, 2024 and sell it today you would earn a total of 3,309 from holding Shake Shack or generate 33.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCS MediaGroup SpA vs. Shake Shack
Performance |
| Timeline |
| RCS MediaGroup SpA |
| Shake Shack |
RCS MediaGroup and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCS MediaGroup and Shake Shack
The main advantage of trading using opposite RCS MediaGroup and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCS MediaGroup 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.| RCS MediaGroup vs. Legible | RCS MediaGroup vs. Sylvania Platinum Limited | RCS MediaGroup vs. Thunderbird Entertainment Group | RCS MediaGroup vs. PAX Global Technology |
| Shake Shack vs. Hyatt Hotels | Shake Shack vs. Smart Share Global | Shake Shack vs. Sweetgreen | Shake Shack vs. Wyndham Hotels Resorts |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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