Correlation Between Shake Shack and United Rentals
Can any of the company-specific risk be diversified away by investing in both Shake Shack and United Rentals 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 United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and United Rentals, you can compare the effects of market volatilities on Shake Shack and United Rentals 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 United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and United Rentals.
Diversification Opportunities for Shake Shack and United Rentals
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and United is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Shake Shack i.e., Shake Shack and United Rentals go up and down completely randomly.
Pair Corralation between Shake Shack and United Rentals
Given the investment horizon of 90 days Shake Shack is expected to generate 1.24 times less return on investment than United Rentals. But when comparing it to its historical volatility, Shake Shack is 1.09 times less risky than United Rentals. It trades about 0.18 of its potential returns per unit of risk. United Rentals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 78,451 in United Rentals on September 3, 2024 and sell it today you would earn a total of 8,149 from holding United Rentals or generate 10.39% 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. United Rentals
Performance |
| Timeline |
| Shake Shack |
| United Rentals |
Shake Shack and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and United Rentals
The main advantage of trading using opposite Shake Shack and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.| Shake Shack vs. Highway Holdings Limited | Shake Shack vs. QCR Holdings | Shake Shack vs. Partner Communications | Shake Shack vs. Acumen Pharmaceuticals |
| United Rentals vs. Alta Equipment Group | United Rentals vs. McGrath RentCorp | United Rentals vs. Herc Holdings | United Rentals vs. HE Equipment Services |
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 CEOs Directory module to screen CEOs from public companies around the world.
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