Correlation Between Shake Shack and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Arrow Electronics 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 Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Arrow Electronics, you can compare the effects of market volatilities on Shake Shack and Arrow Electronics 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 Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Arrow Electronics.
Diversification Opportunities for Shake Shack and Arrow Electronics
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Shake and Arrow is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Shake Shack i.e., Shake Shack and Arrow Electronics go up and down completely randomly.
Pair Corralation between Shake Shack and Arrow Electronics
Given the investment horizon of 90 days Shake Shack is expected to generate 1.86 times more return on investment than Arrow Electronics. However, Shake Shack is 1.86 times more volatile than Arrow Electronics. It trades about 0.11 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.01 per unit of risk. If you would invest 6,683 in Shake Shack on September 4, 2024 and sell it today you would earn a total of 6,551 from holding Shake Shack or generate 98.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. Arrow Electronics
Performance |
| Timeline |
| Shake Shack |
| Arrow Electronics |
Shake Shack and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Arrow Electronics
The main advantage of trading using opposite Shake Shack and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.| Shake Shack vs. Hyatt Hotels | Shake Shack vs. Smart Share Global | Shake Shack vs. Sweetgreen | Shake Shack vs. Wyndham Hotels Resorts |
| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. ScanSource | Arrow Electronics vs. PC Connection | Arrow Electronics vs. Aquagold International |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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