Correlation Between Shake Shack and Hyatt Hotels
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Hyatt Hotels 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 Hyatt Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Hyatt Hotels, you can compare the effects of market volatilities on Shake Shack and Hyatt Hotels 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 Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Hyatt Hotels.
Diversification Opportunities for Shake Shack and Hyatt Hotels
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shake and Hyatt is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels 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 Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of Shake Shack i.e., Shake Shack and Hyatt Hotels go up and down completely randomly.
Pair Corralation between Shake Shack and Hyatt Hotels
Given the investment horizon of 90 days Shake Shack is expected to generate 1.12 times less return on investment than Hyatt Hotels. In addition to that, Shake Shack is 1.2 times more volatile than Hyatt Hotels. It trades about 0.17 of its total potential returns per unit of risk. Hyatt Hotels is currently generating about 0.22 per unit of volatility. If you would invest 14,293 in Hyatt Hotels on September 4, 2024 and sell it today you would earn a total of 1,328 from holding Hyatt Hotels or generate 9.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. Hyatt Hotels
Performance |
| Timeline |
| Shake Shack |
| Hyatt Hotels |
Shake Shack and Hyatt Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Hyatt Hotels
The main advantage of trading using opposite Shake Shack and Hyatt Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Hyatt Hotels 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 Hyatt Hotels will offset losses from the drop in Hyatt Hotels' long position.| Shake Shack vs. Hyatt Hotels | Shake Shack vs. Smart Share Global | Shake Shack vs. Sweetgreen | Shake Shack vs. Wyndham Hotels Resorts |
| Hyatt Hotels vs. Marriott International | Hyatt Hotels vs. InterContinental Hotels Group | Hyatt Hotels vs. Choice Hotels International | Hyatt Hotels vs. Wyndham Hotels Resorts |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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