Correlation Between Reservoir Media and Shake Shack

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

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

Diversification Opportunities for Reservoir Media and Shake Shack

0.82

Correlation Coefficient

Reservoir Media  Shake Shack

Very poor diversification

The 3 months correlation between Reservoir and Shake is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Reservoir Media 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 Reservoir Media 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 Reservoir Media i.e., Reservoir Media and Shake Shack go up and down completely randomly.

Pair Corralation between Reservoir Media and Shake Shack

Given the investment horizon of 90 days Reservoir Media is expected to generate 0.48 times more return on investment than Shake Shack. However, Reservoir Media is 2.09 times less risky 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  816.00  in Reservoir Media on December 5, 2024 and sell it today you would lose (51.00) from holding Reservoir Media or give up 6.25% of portfolio value over 90 days.

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

Reservoir Media  vs.  Shake Shack

Reservoir Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reservoir Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Shake Shack

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shake Shack has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Reservoir Media and Shake Shack

The main advantage of trading using opposite Reservoir Media and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reservoir Media 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 Reservoir Media 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..