Correlation Between Western Copper and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Western Copper and Shake Shack 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 Western Copper and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Copper and and Shake Shack, you can compare the effects of market volatilities on Western Copper and Shake Shack 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 Western Copper with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Shake Shack.
Diversification Opportunities for Western Copper and Shake Shack
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and Shake is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Western Copper 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 Western Copper and are associated (or correlated) with Shake Shack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shake Shack has no effect on the direction of Western Copper i.e., Western Copper and Shake Shack go up and down completely randomly.
Pair Corralation between Western Copper and Shake Shack
Considering the 90-day investment horizon Western Copper and is expected to under-perform the Shake Shack. But the stock apears to be less risky and, when comparing its historical volatility, Western Copper and is 1.3 times less risky than Shake Shack. The stock trades about -0.19 of its potential returns per unit of risk. The Shake Shack is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 11,649 in Shake Shack on September 19, 2024 and sell it today you would earn a total of 1,270 from holding Shake Shack or generate 10.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Copper and vs. Shake Shack
Performance |
| Timeline |
| Western Copper |
| Shake Shack |
Western Copper and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Copper and Shake Shack
The main advantage of trading using opposite Western Copper and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper position performs unexpectedly, Shake Shack 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 Shake Shack will offset losses from the drop in Shake Shack's long position.| Western Copper vs. Vale SA ADR | Western Copper vs. Electra Battery Materials | Western Copper vs. Foremost Lithium Resource | Western Copper vs. Brazil Potash Corp |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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