Correlation Between Shake Shack and Vera Bradley
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Vera Bradley 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 Vera Bradley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Vera Bradley, you can compare the effects of market volatilities on Shake Shack and Vera Bradley 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 Vera Bradley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Vera Bradley.
Diversification Opportunities for Shake Shack and Vera Bradley
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Shake and Vera is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley 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 Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of Shake Shack i.e., Shake Shack and Vera Bradley go up and down completely randomly.
Pair Corralation between Shake Shack and Vera Bradley
Given the investment horizon of 90 days Shake Shack is expected to generate 1.06 times more return on investment than Vera Bradley. However, Shake Shack is 1.06 times more volatile than Vera Bradley. It trades about 0.09 of its potential returns per unit of risk. Vera Bradley is currently generating about 0.02 per unit of risk. If you would invest 4,808 in Shake Shack on August 31, 2024 and sell it today you would earn a total of 8,565 from holding Shake Shack or generate 178.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Shake Shack vs. Vera Bradley
Performance |
| Timeline |
| Shake Shack |
| Vera Bradley |
Shake Shack and Vera Bradley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Vera Bradley
The main advantage of trading using opposite Shake Shack and Vera Bradley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Vera Bradley 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 Vera Bradley will offset losses from the drop in Vera Bradley's long position.| Shake Shack vs. RLJ Lodging Trust | Shake Shack vs. Aquagold International | Shake Shack vs. Stepstone Group | Shake Shack vs. Morningstar Unconstrained Allocation |
| Vera Bradley vs. Rocky Brands | Vera Bradley vs. Steven Madden | Vera Bradley vs. Caleres | Vera Bradley vs. Weyco 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.
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