Correlation Between Shake Shack and Sea
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Sea 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 Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Sea, you can compare the effects of market volatilities on Shake Shack and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Sea.
Diversification Opportunities for Shake Shack and Sea
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Sea is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Shake Shack i.e., Shake Shack and Sea go up and down completely randomly.
Pair Corralation between Shake Shack and Sea
Given the investment horizon of 90 days Shake Shack is expected to generate 1.35 times less return on investment than Sea. In addition to that, Shake Shack is 1.2 times more volatile than Sea. It trades about 0.11 of its total potential returns per unit of risk. Sea is currently generating about 0.17 per unit of volatility. If you would invest 7,113 in Sea on September 3, 2024 and sell it today you would earn a total of 4,267 from holding Sea or generate 59.99% 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. Sea
Performance |
| Timeline |
| Shake Shack |
| Sea |
Shake Shack and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Sea
The main advantage of trading using opposite Shake Shack and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| Shake Shack vs. Highway Holdings Limited | Shake Shack vs. QCR Holdings | Shake Shack vs. Partner Communications | Shake Shack vs. Acumen Pharmaceuticals |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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