Correlation Between Shake Shack and SunOpta
Can any of the company-specific risk be diversified away by investing in both Shake Shack and SunOpta 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 SunOpta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and SunOpta, you can compare the effects of market volatilities on Shake Shack and SunOpta 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 SunOpta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and SunOpta.
Diversification Opportunities for Shake Shack and SunOpta
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and SunOpta is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta 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 SunOpta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunOpta has no effect on the direction of Shake Shack i.e., Shake Shack and SunOpta go up and down completely randomly.
Pair Corralation between Shake Shack and SunOpta
Given the investment horizon of 90 days Shake Shack is expected to generate 2.76 times less return on investment than SunOpta. But when comparing it to its historical volatility, Shake Shack is 1.23 times less risky than SunOpta. It trades about 0.2 of its potential returns per unit of risk. SunOpta is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 576.00 in SunOpta on August 26, 2024 and sell it today you would earn a total of 206.00 from holding SunOpta or generate 35.76% 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. SunOpta
Performance |
| Timeline |
| Shake Shack |
| SunOpta |
Shake Shack and SunOpta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and SunOpta
The main advantage of trading using opposite Shake Shack and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, SunOpta 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 SunOpta will offset losses from the drop in SunOpta's long position.| Shake Shack vs. Dominos Pizza | Shake Shack vs. Papa Johns International | Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Darden Restaurants |
| SunOpta vs. Seneca Foods Corp | SunOpta vs. Central Garden Pet | SunOpta vs. Central Garden Pet | SunOpta vs. Natures Sunshine Products |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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