Correlation Between Shake Shack and NIP Group
Can any of the company-specific risk be diversified away by investing in both Shake Shack and NIP Group 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 NIP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and NIP Group American, you can compare the effects of market volatilities on Shake Shack and NIP Group 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 NIP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and NIP Group.
Diversification Opportunities for Shake Shack and NIP Group
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Shake and NIP is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and NIP Group American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIP Group American 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 NIP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIP Group American has no effect on the direction of Shake Shack i.e., Shake Shack and NIP Group go up and down completely randomly.
Pair Corralation between Shake Shack and NIP Group
Given the investment horizon of 90 days Shake Shack is expected to generate 0.67 times more return on investment than NIP Group. However, Shake Shack is 1.49 times less risky than NIP Group. It trades about 0.16 of its potential returns per unit of risk. NIP Group American is currently generating about -0.13 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 988.00 from holding Shake Shack or generate 8.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. NIP Group American
Performance |
| Timeline |
| Shake Shack |
| NIP Group American |
Shake Shack and NIP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and NIP Group
The main advantage of trading using opposite Shake Shack and NIP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, NIP Group 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 NIP Group will offset losses from the drop in NIP Group's long position.| Shake Shack vs. RLJ Lodging Trust | Shake Shack vs. Aquagold International | Shake Shack vs. Stepstone Group | Shake Shack vs. Morningstar Unconstrained Allocation |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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