Correlation Between Shake Shack and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Meliá Hotels 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 Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Meli Hotels International, you can compare the effects of market volatilities on Shake Shack and Meliá Hotels 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 Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Meliá Hotels.
Diversification Opportunities for Shake Shack and Meliá Hotels
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Meliá is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International 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 Meliá Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Shake Shack i.e., Shake Shack and Meliá Hotels go up and down completely randomly.
Pair Corralation between Shake Shack and Meliá Hotels
Given the investment horizon of 90 days Shake Shack is expected to generate 1.23 times more return on investment than Meliá Hotels. However, Shake Shack is 1.23 times more volatile than Meli Hotels International. It trades about 0.08 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.04 per unit of risk. If you would invest 4,971 in Shake Shack on August 24, 2024 and sell it today you would earn a total of 7,330 from holding Shake Shack or generate 147.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.98% |
| Values | Daily Returns |
Shake Shack vs. Meli Hotels International
Performance |
| Timeline |
| Shake Shack |
| Meli Hotels International |
Shake Shack and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Meliá Hotels
The main advantage of trading using opposite Shake Shack and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Meliá Hotels 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 Meliá Hotels will offset losses from the drop in Meliá Hotels' long position.| Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Eshallgo Class A | Shake Shack vs. Amtech Systems | Shake Shack vs. Gold Fields Ltd |
| Meliá Hotels vs. Marriott International | Meliá Hotels vs. Hilton Worldwide Holdings | Meliá Hotels vs. InterContinental Hotels Group | Meliá Hotels vs. InterContinental Hotels Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |