Correlation Between Shake Shack and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Westrock Coffee 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 Westrock Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Westrock Coffee, you can compare the effects of market volatilities on Shake Shack and Westrock Coffee 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 Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Westrock Coffee.
Diversification Opportunities for Shake Shack and Westrock Coffee
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Shake and Westrock is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Shake Shack i.e., Shake Shack and Westrock Coffee go up and down completely randomly.
Pair Corralation between Shake Shack and Westrock Coffee
Given the investment horizon of 90 days Shake Shack is expected to under-perform the Westrock Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Shake Shack is 1.63 times less risky than Westrock Coffee. The stock trades about -0.22 of its potential returns per unit of risk. The Westrock Coffee is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 635.00 in Westrock Coffee on November 2, 2024 and sell it today you would earn a total of 79.00 from holding Westrock Coffee or generate 12.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shake Shack vs. Westrock Coffee
Performance |
| Timeline |
| Shake Shack |
| Westrock Coffee |
Shake Shack and Westrock Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shake Shack and Westrock Coffee
The main advantage of trading using opposite Shake Shack and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.| Shake Shack vs. Dominos Pizza Common | Shake Shack vs. Papa Johns International | Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Darden Restaurants |
| Westrock Coffee vs. General Mills | Westrock Coffee vs. Campbell Soup | Westrock Coffee vs. ConAgra Foods | Westrock Coffee vs. Hormel Foods |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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