Correlation Between Shake Shack and Albemarle
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Albemarle 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 Shake Shack and Albemarle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Albemarle, you can compare the effects of market volatilities on Shake Shack and Albemarle 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 Shake Shack with a short position of Albemarle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Albemarle.
Diversification Opportunities for Shake Shack and Albemarle
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Albemarle is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle and Shake Shack 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 Shake Shack are associated (or correlated) with Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Shake Shack i.e., Shake Shack and Albemarle go up and down completely randomly.
Pair Corralation between Shake Shack and Albemarle
Given the investment horizon of 90 days Shake Shack is expected to generate 1.02 times more return on investment than Albemarle. However, Shake Shack is 1.02 times more volatile than Albemarle. It trades about 0.08 of its potential returns per unit of risk. Albemarle is currently generating about 0.01 per unit of risk. If you would invest 4,971 in Shake Shack on August 26, 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 | Significant |
| Accuracy | 37.02% |
| Values | Daily Returns |
Shake Shack vs. Albemarle
Performance |
| Timeline |
| Shake Shack |
| Albemarle |
Shake Shack and Albemarle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Albemarle
The main advantage of trading using opposite Shake Shack and Albemarle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Albemarle 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 Albemarle will offset losses from the drop in Albemarle's long position.| Shake Shack vs. Dominos Pizza | Shake Shack vs. Papa Johns International | Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Darden Restaurants |
| Albemarle vs. Titan Machinery | Albemarle vs. Simon Property Group | Albemarle vs. Kite Realty Group | Albemarle vs. National Vision Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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