Correlation Between Shake Shack and Six Flags
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Six Flags 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 Six Flags into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Six Flags Entertainment, you can compare the effects of market volatilities on Shake Shack and Six Flags 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 Six Flags. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Six Flags.
Diversification Opportunities for Shake Shack and Six Flags
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Six is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment 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 Six Flags. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of Shake Shack i.e., Shake Shack and Six Flags go up and down completely randomly.
Pair Corralation between Shake Shack and Six Flags
Given the investment horizon of 90 days Shake Shack is expected to generate 1.47 times more return on investment than Six Flags. However, Shake Shack is 1.47 times more volatile than Six Flags Entertainment. It trades about 0.08 of its potential returns per unit of risk. Six Flags Entertainment is currently generating about 0.03 per unit of risk. If you would invest 5,509 in Shake Shack on September 3, 2024 and sell it today you would earn a total of 7,864 from holding Shake Shack or generate 142.75% 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. Six Flags Entertainment
Performance |
| Timeline |
| Shake Shack |
| Six Flags Entertainment |
Shake Shack and Six Flags Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Six Flags
The main advantage of trading using opposite Shake Shack and Six Flags positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Six Flags 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 Six Flags will offset losses from the drop in Six Flags' long position.| Shake Shack vs. Highway Holdings Limited | Shake Shack vs. QCR Holdings | Shake Shack vs. Partner Communications | Shake Shack vs. Acumen Pharmaceuticals |
| Six Flags vs. Planet Fitness | Six Flags vs. Madison Square Garden | Six Flags vs. Mattel Inc | Six Flags vs. Johnson Outdoors |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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