Correlation Between Aerofoam Metals and Shake Shack

Can any of the company-specific risk be diversified away by investing in both Aerofoam Metals 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 Aerofoam Metals and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aerofoam Metals and Shake Shack, you can compare the effects of market volatilities on Aerofoam Metals 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 Aerofoam Metals with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerofoam Metals and Shake Shack.

Diversification Opportunities for Aerofoam Metals and Shake Shack

0.0

Correlation Coefficient

Aerofoam Metals  Shake Shack

Pay attention - limited upside

The 3 months correlation between Aerofoam and Shake is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aerofoam Metals and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Aerofoam Metals 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 Aerofoam Metals 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 Aerofoam Metals i.e., Aerofoam Metals and Shake Shack go up and down completely randomly.

Pair Corralation between Aerofoam Metals and Shake Shack

Given the investment horizon of 90 days Aerofoam Metals is expected to generate 20.87 times more return on investment than Shake Shack. However, Aerofoam Metals is 20.87 times more volatile than Shake Shack. It trades about 0.06 of its potential returns per unit of risk. Shake Shack is currently generating about 0.08 per unit of risk. If you would invest  0.00  in Aerofoam Metals on October 12, 2024 and sell it today you would earn a total of  0.01  from holding Aerofoam Metals or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Aerofoam Metals  vs.  Shake Shack

Aerofoam Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerofoam Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Aerofoam Metals is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Shake Shack

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Shake Shack disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerofoam Metals and Shake Shack

The main advantage of trading using opposite Aerofoam Metals and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerofoam Metals 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.

The idea behind Aerofoam Metals and Shake Shack 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.

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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.