Correlation Between Organic Sales and Shake Shack

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

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

Diversification Opportunities for Organic Sales and Shake Shack

0.0

Correlation Coefficient

Organic Sales  Shake Shack

Pay attention - limited upside

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

Pair Corralation between Organic Sales and Shake Shack

If you would invest  8,901  in Shake Shack on September 19, 2024 and sell it today you would earn a total of  3,689  from holding Shake Shack or generate 41.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Organic Sales and  vs.  Shake Shack

Organic Sales

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organic Sales and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Organic Sales is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Shake Shack

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 9 (%) 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 Organic Sales and Shake Shack

The main advantage of trading using opposite Organic Sales and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Organic Sales 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 Organic Sales and 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.