Correlation Between Allied Gaming and Shake Shack

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

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

Diversification Opportunities for Allied Gaming and Shake Shack

-0.59

Correlation Coefficient

Allied Gaming  Shake Shack

Excellent diversification

The 3 months correlation between Allied and Shake is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Allied Gaming Entertainment and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Allied Gaming 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 Allied Gaming Entertainment 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 Allied Gaming i.e., Allied Gaming and Shake Shack go up and down completely randomly.

Pair Corralation between Allied Gaming and Shake Shack

Given the investment horizon of 90 days Allied Gaming is expected to generate 3.07 times less return on investment than Shake Shack. In addition to that, Allied Gaming is 1.7 times more volatile than Shake Shack. It trades about 0.01 of its total potential returns per unit of risk. Shake Shack is currently generating about 0.07 per unit of volatility. If you would invest  5,784  in Shake Shack on October 27, 2024 and sell it today you would earn a total of  6,135  from holding Shake Shack or generate 106.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Allied Gaming Entertainment  vs.  Shake Shack

Allied Gaming Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Gaming Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shake Shack

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Shake Shack is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Allied Gaming and Shake Shack

The main advantage of trading using opposite Allied Gaming and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Gaming 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 Allied Gaming Entertainment 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.