Correlation Between Shake Shack and Joint Stock
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Joint Stock 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 Joint Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Joint Stock, you can compare the effects of market volatilities on Shake Shack and Joint Stock 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 Joint Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Joint Stock.
Diversification Opportunities for Shake Shack and Joint Stock
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shake and Joint is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Shake Shack i.e., Shake Shack and Joint Stock go up and down completely randomly.
Pair Corralation between Shake Shack and Joint Stock
Given the investment horizon of 90 days Shake Shack is expected to generate 1.24 times more return on investment than Joint Stock. However, Shake Shack is 1.24 times more volatile than Joint Stock. It trades about 0.18 of its potential returns per unit of risk. Joint Stock is currently generating about -0.11 per unit of risk. If you would invest 12,247 in Shake Shack on August 31, 2024 and sell it today you would earn a total of 1,126 from holding Shake Shack or generate 9.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. Joint Stock
Performance |
| Timeline |
| Shake Shack |
| Joint Stock |
Shake Shack and Joint Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Joint Stock
The main advantage of trading using opposite Shake Shack and Joint Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Joint Stock 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 Joint Stock will offset losses from the drop in Joint Stock'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 |
| Joint Stock vs. Grocery Outlet Holding | Joint Stock vs. NH Foods Ltd | Joint Stock vs. Natural Alternatives International | Joint Stock vs. Tyson Foods |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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