Correlation Between Shake Shack and Rivian Automotive
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Rivian Automotive 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 Rivian Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Rivian Automotive, you can compare the effects of market volatilities on Shake Shack and Rivian Automotive 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 Rivian Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Rivian Automotive.
Diversification Opportunities for Shake Shack and Rivian Automotive
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Shake and Rivian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive 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 Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of Shake Shack i.e., Shake Shack and Rivian Automotive go up and down completely randomly.
Pair Corralation between Shake Shack and Rivian Automotive
Given the investment horizon of 90 days Shake Shack is expected to generate 0.59 times more return on investment than Rivian Automotive. However, Shake Shack is 1.69 times less risky than Rivian Automotive. It trades about 0.13 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.07 per unit of risk. If you would invest 8,900 in Shake Shack on September 12, 2024 and sell it today you would earn a total of 4,428 from holding Shake Shack or generate 49.75% 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. Rivian Automotive
Performance |
| Timeline |
| Shake Shack |
| Rivian Automotive |
Shake Shack and Rivian Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Rivian Automotive
The main advantage of trading using opposite Shake Shack and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Rivian Automotive 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 Rivian Automotive will offset losses from the drop in Rivian Automotive's long position.| Shake Shack vs. Noble Romans | Shake Shack vs. Good Times Restaurants | Shake Shack vs. Flanigans Enterprises | Shake Shack vs. FAT Brands |
| Rivian Automotive vs. Nio Class A | Rivian Automotive vs. Xpeng Inc | Rivian Automotive vs. Tesla Inc | Rivian Automotive vs. Li Auto |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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