Correlation Between Shake Shack and Universal Technical
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Universal Technical 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 Universal Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Universal Technical Institute, you can compare the effects of market volatilities on Shake Shack and Universal Technical 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 Universal Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Universal Technical.
Diversification Opportunities for Shake Shack and Universal Technical
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shake and Universal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical 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 Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of Shake Shack i.e., Shake Shack and Universal Technical go up and down completely randomly.
Pair Corralation between Shake Shack and Universal Technical
Given the investment horizon of 90 days Shake Shack is expected to generate 1.31 times less return on investment than Universal Technical. In addition to that, Shake Shack is 1.01 times more volatile than Universal Technical Institute. It trades about 0.08 of its total potential returns per unit of risk. Universal Technical Institute is currently generating about 0.1 per unit of volatility. If you would invest 730.00 in Universal Technical Institute on August 26, 2024 and sell it today you would earn a total of 1,808 from holding Universal Technical Institute or generate 247.67% 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. Universal Technical Institute
Performance |
| Timeline |
| Shake Shack |
| Universal Technical |
Shake Shack and Universal Technical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Universal Technical
The main advantage of trading using opposite Shake Shack and Universal Technical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Universal Technical 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 Universal Technical will offset losses from the drop in Universal Technical's long position.The idea behind Shake Shack and Universal Technical Institute pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Universal Technical vs. Laureate Education | Universal Technical vs. Strategic Education | Universal Technical vs. Grand Canyon Education | Universal Technical vs. American Public Education |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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