Correlation Between Shake Shack and Restaurant Brands
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Restaurant Brands 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 Restaurant Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Restaurant Brands International, you can compare the effects of market volatilities on Shake Shack and Restaurant Brands 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 Restaurant Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Restaurant Brands.
Diversification Opportunities for Shake Shack and Restaurant Brands
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Shake and Restaurant is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands 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 Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of Shake Shack i.e., Shake Shack and Restaurant Brands go up and down completely randomly.
Pair Corralation between Shake Shack and Restaurant Brands
Given the investment horizon of 90 days Shake Shack is expected to generate 2.8 times more return on investment than Restaurant Brands. However, Shake Shack is 2.8 times more volatile than Restaurant Brands International. It trades about 0.22 of its potential returns per unit of risk. Restaurant Brands International is currently generating about -0.08 per unit of risk. If you would invest 11,426 in Shake Shack on August 28, 2024 and sell it today you would earn a total of 1,516 from holding Shake Shack or generate 13.27% 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. Restaurant Brands Internationa
Performance |
| Timeline |
| Shake Shack |
| Restaurant Brands |
Shake Shack and Restaurant Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Restaurant Brands
The main advantage of trading using opposite Shake Shack and Restaurant Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Restaurant Brands 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 Restaurant Brands will offset losses from the drop in Restaurant Brands' long position.| Shake Shack vs. Dominos Pizza | Shake Shack vs. Papa Johns International | Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Darden Restaurants |
| Restaurant Brands vs. Yum Brands | Restaurant Brands vs. Papa Johns International | Restaurant Brands vs. Jack In The | Restaurant Brands vs. Dominos Pizza |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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