Correlation Between Stepan and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Stepan 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 Stepan and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Shake Shack, you can compare the effects of market volatilities on Stepan 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 Stepan with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Shake Shack.
Diversification Opportunities for Stepan and Shake Shack
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stepan and Shake is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Stepan 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 Stepan Company 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 Stepan i.e., Stepan and Shake Shack go up and down completely randomly.
Pair Corralation between Stepan and Shake Shack
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Shake Shack. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.74 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 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,172 in Shake Shack on September 2, 2024 and sell it today you would earn a total of 7,201 from holding Shake Shack or generate 116.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Shake Shack
Performance |
| Timeline |
| Stepan Company |
| Shake Shack |
Stepan and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Shake Shack
The main advantage of trading using opposite Stepan and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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.| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |