Correlation Between Shake Shack and Allied Gaming

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

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

Diversification Opportunities for Shake Shack and Allied Gaming

-0.73

Correlation Coefficient

Shake Shack  Allied Gaming

Pay attention - limited upside

The 3 months correlation between Shake and Allied is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Allied Gaming Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Gaming Entert and Shake Shack 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 Shake Shack are associated (or correlated) with Allied Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Gaming Entert has no effect on the direction of Shake Shack i.e., Shake Shack and Allied Gaming go up and down completely randomly.

Pair Corralation between Shake Shack and Allied Gaming

Given the investment horizon of 90 days Shake Shack is expected to under-perform the Allied Gaming. But the stock apears to be less risky and, when comparing its historical volatility, Shake Shack is 3.12 times less risky than Allied Gaming. The stock trades about -0.12 of its potential returns per unit of risk. The Allied Gaming Entertainment is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Allied Gaming Entertainment on October 12, 2024 and sell it today you would earn a total of  6.00  from holding Allied Gaming Entertainment or generate 7.14% return on investment over 90 days.

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

Shake Shack  vs.  Allied Gaming Entertainment

Shake Shack

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Shake Shack disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Shake Shack and Allied Gaming

The main advantage of trading using opposite Shake Shack and Allied Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Allied Gaming 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 Allied Gaming will offset losses from the drop in Allied Gaming's long position.

The idea behind Shake Shack and Allied Gaming Entertainment 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.