Correlation Between Shake Shack and Playtech Plc
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Playtech Plc 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 Playtech Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Playtech plc, you can compare the effects of market volatilities on Shake Shack and Playtech Plc 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 Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Playtech Plc.
Diversification Opportunities for Shake Shack and Playtech Plc
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Playtech is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of Shake Shack i.e., Shake Shack and Playtech Plc go up and down completely randomly.
Pair Corralation between Shake Shack and Playtech Plc
Given the investment horizon of 90 days Shake Shack is expected to generate 3.37 times more return on investment than Playtech Plc. However, Shake Shack is 3.37 times more volatile than Playtech plc. It trades about 0.05 of its potential returns per unit of risk. Playtech plc is currently generating about -0.05 per unit of risk. If you would invest 13,073 in Shake Shack on September 12, 2024 and sell it today you would earn a total of 255.00 from holding Shake Shack or generate 1.95% 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. Playtech plc
Performance |
| Timeline |
| Shake Shack |
| Playtech plc |
Shake Shack and Playtech Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Playtech Plc
The main advantage of trading using opposite Shake Shack and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Playtech Plc 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 Playtech Plc will offset losses from the drop in Playtech Plc's long position.| Shake Shack vs. Noble Romans | Shake Shack vs. Good Times Restaurants | Shake Shack vs. Flanigans Enterprises | Shake Shack vs. FAT Brands |
| Playtech Plc vs. Skechers USA | Playtech Plc vs. Corsair Gaming | Playtech Plc vs. Artisan Partners Asset | Playtech Plc vs. NetEase |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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