Correlation Between WW International and Shake Shack
Can any of the company-specific risk be diversified away by investing in both WW International 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 WW International and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW International and Shake Shack, you can compare the effects of market volatilities on WW International 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 WW International with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW International and Shake Shack.
Diversification Opportunities for WW International and Shake Shack
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between WW International and Shake is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding WW International and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and WW International 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 WW International 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 WW International i.e., WW International and Shake Shack go up and down completely randomly.
Pair Corralation between WW International and Shake Shack
Allowing for the 90-day total investment horizon WW International is expected to generate 3.48 times more return on investment than Shake Shack. However, WW International is 3.48 times more volatile than Shake Shack. It trades about 0.08 of its potential returns per unit of risk. Shake Shack is currently generating about 0.16 per unit of risk. If you would invest 119.00 in WW International on September 5, 2024 and sell it today you would earn a total of 10.00 from holding WW International or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WW International vs. Shake Shack
Performance |
| Timeline |
| WW International |
| Shake Shack |
WW International and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WW International and Shake Shack
The main advantage of trading using opposite WW International and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW International 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.| WW International vs. HR Block | WW International vs. Service International | WW International vs. Rollins | WW International vs. Carriage Services |
| Shake Shack vs. Hyatt Hotels | Shake Shack vs. Smart Share Global | Shake Shack vs. Wyndham Hotels Resorts | Shake Shack vs. WW International |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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