Correlation Between Luxfer Holdings and Shake Shack

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

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

Diversification Opportunities for Luxfer Holdings and Shake Shack

0.94

Correlation Coefficient

Luxfer Holdings  Shake Shack

Almost no diversification

The 3 months correlation between Luxfer and Shake is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Luxfer Holdings 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 Luxfer Holdings PLC 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 Luxfer Holdings i.e., Luxfer Holdings and Shake Shack go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Shake Shack

Given the investment horizon of 90 days Luxfer Holdings is expected to generate 1.08 times less return on investment than Shake Shack. In addition to that, Luxfer Holdings is 1.3 times more volatile than Shake Shack. It trades about 0.17 of its total potential returns per unit of risk. Shake Shack is currently generating about 0.24 per unit of volatility. If you would invest  9,613  in Shake Shack on September 5, 2024 and sell it today you would earn a total of  3,621  from holding Shake Shack or generate 37.67% return on investment over 90 days.

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

Luxfer Holdings PLC  vs.  Shake Shack

Luxfer Holdings PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Shake Shack

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Shake Shack disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luxfer Holdings and Shake Shack

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

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.