Correlation Between Shake Shack and Radcom
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Radcom 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 Radcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Radcom, you can compare the effects of market volatilities on Shake Shack and Radcom 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 Radcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Radcom.
Diversification Opportunities for Shake Shack and Radcom
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Radcom is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Shake Shack i.e., Shake Shack and Radcom go up and down completely randomly.
Pair Corralation between Shake Shack and Radcom
Given the investment horizon of 90 days Shake Shack is expected to generate 1.36 times less return on investment than Radcom. But when comparing it to its historical volatility, Shake Shack is 1.33 times less risky than Radcom. It trades about 0.25 of its potential returns per unit of risk. Radcom is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,008 in Radcom on August 29, 2024 and sell it today you would earn a total of 221.00 from holding Radcom or generate 21.92% 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. Radcom
Performance |
| Timeline |
| Shake Shack |
| Radcom |
Shake Shack and Radcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Radcom
The main advantage of trading using opposite Shake Shack and Radcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Radcom 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 Radcom will offset losses from the drop in Radcom's long position.| Shake Shack vs. Jack In The | Shake Shack vs. Potbelly Co | Shake Shack vs. BJs Restaurants | Shake Shack vs. One Group Hospitality |
| Radcom vs. Shenandoah Telecommunications Co | Radcom vs. Anterix | Radcom vs. SK Telecom Co | Radcom vs. Liberty Broadband Srs |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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