Correlation Between Shake Shack and Boyd Gaming
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Boyd Gaming 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 Boyd Gaming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Boyd Gaming, you can compare the effects of market volatilities on Shake Shack and Boyd Gaming 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 Boyd Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Boyd Gaming.
Diversification Opportunities for Shake Shack and Boyd Gaming
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Shake and Boyd is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming 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 Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of Shake Shack i.e., Shake Shack and Boyd Gaming go up and down completely randomly.
Pair Corralation between Shake Shack and Boyd Gaming
Given the investment horizon of 90 days Shake Shack is expected to generate 1.6 times more return on investment than Boyd Gaming. However, Shake Shack is 1.6 times more volatile than Boyd Gaming. It trades about 0.08 of its potential returns per unit of risk. Boyd Gaming is currently generating about 0.04 per unit of risk. If you would invest 4,886 in Shake Shack on August 29, 2024 and sell it today you would earn a total of 8,375 from holding Shake Shack or generate 171.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. Boyd Gaming
Performance |
| Timeline |
| Shake Shack |
| Boyd Gaming |
Shake Shack and Boyd Gaming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Boyd Gaming
The main advantage of trading using opposite Shake Shack and Boyd Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Boyd Gaming 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 Boyd Gaming will offset losses from the drop in Boyd Gaming'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 |
| Boyd Gaming vs. MGM Resorts International | Boyd Gaming vs. Las Vegas Sands | Boyd Gaming vs. Wynn Resorts Limited | Boyd Gaming vs. Penn National Gaming |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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