Correlation Between Shake Shack and Luckin Coffee
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Luckin Coffee 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 Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Luckin Coffee, you can compare the effects of market volatilities on Shake Shack and Luckin Coffee 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 Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Luckin Coffee.
Diversification Opportunities for Shake Shack and Luckin Coffee
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shake and Luckin is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee 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 Luckin Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luckin Coffee has no effect on the direction of Shake Shack i.e., Shake Shack and Luckin Coffee go up and down completely randomly.
Pair Corralation between Shake Shack and Luckin Coffee
If you would invest 12,356 in Shake Shack on September 5, 2024 and sell it today you would earn a total of 878.00 from holding Shake Shack or generate 7.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Shake Shack vs. Luckin Coffee
Performance |
| Timeline |
| Shake Shack |
| Luckin Coffee |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shake Shack and Luckin Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Luckin Coffee
The main advantage of trading using opposite Shake Shack and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Luckin Coffee 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 Luckin Coffee will offset losses from the drop in Luckin Coffee's long position.| Shake Shack vs. Hyatt Hotels | Shake Shack vs. Smart Share Global | Shake Shack vs. Wyndham Hotels Resorts | Shake Shack vs. WW International |
| Luckin Coffee vs. Shake Shack | Luckin Coffee vs. Dominos Pizza | Luckin Coffee vs. Papa Johns International | Luckin Coffee vs. Chipotle Mexican Grill |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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