Correlation Between Saia and Shake Shack

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

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

Diversification Opportunities for Saia and Shake Shack

0.55

Correlation Coefficient

Saia  Shake Shack

Very weak diversification

The 3 months correlation between Saia and Shake is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Saia Inc and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and Saia 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 Saia Inc 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 Saia i.e., Saia and Shake Shack go up and down completely randomly.

Pair Corralation between Saia and Shake Shack

Given the investment horizon of 90 days Saia Inc is expected to generate 1.3 times more return on investment than Shake Shack. However, Saia is 1.3 times more volatile than Shake Shack. It trades about -0.02 of its potential returns per unit of risk. Shake Shack is currently generating about -0.32 per unit of risk. If you would invest  49,493  in Saia Inc on October 20, 2024 and sell it today you would lose (804.00) from holding Saia Inc or give up 1.62% of portfolio value over 90 days.

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

Saia Inc  vs.  Shake Shack

Saia Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Saia Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Saia sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak basic indicators, Shake Shack may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Saia and Shake Shack

The main advantage of trading using opposite Saia and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saia 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 Saia Inc 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.