Correlation Between Shake Shack and Cracker Barrel
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Cracker Barrel 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 Cracker Barrel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Cracker Barrel Old, you can compare the effects of market volatilities on Shake Shack and Cracker Barrel 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 Cracker Barrel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Cracker Barrel.
Diversification Opportunities for Shake Shack and Cracker Barrel
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Cracker is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Cracker Barrel Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cracker Barrel Old 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 Cracker Barrel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cracker Barrel Old has no effect on the direction of Shake Shack i.e., Shake Shack and Cracker Barrel go up and down completely randomly.
Pair Corralation between Shake Shack and Cracker Barrel
Given the investment horizon of 90 days Shake Shack is expected to generate 0.91 times more return on investment than Cracker Barrel. However, Shake Shack is 1.1 times less risky than Cracker Barrel. It trades about 0.12 of its potential returns per unit of risk. Cracker Barrel Old is currently generating about 0.04 per unit of risk. If you would invest 9,257 in Shake Shack on September 1, 2024 and sell it today you would earn a total of 4,116 from holding Shake Shack or generate 44.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. Cracker Barrel Old
Performance |
| Timeline |
| Shake Shack |
| Cracker Barrel Old |
Shake Shack and Cracker Barrel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Cracker Barrel
The main advantage of trading using opposite Shake Shack and Cracker Barrel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Cracker Barrel 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 Cracker Barrel will offset losses from the drop in Cracker Barrel'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 |
| Cracker Barrel vs. The Wendys Co | Cracker Barrel vs. Shake Shack | Cracker Barrel vs. Papa Johns International | Cracker Barrel vs. Darden Restaurants |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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