Correlation Between Shake Shack and Bilibili

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

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

Diversification Opportunities for Shake Shack and Bilibili

0.03

Correlation Coefficient

Shake Shack  Bilibili

Significant diversification

The 3 months correlation between Shake and Bilibili is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Bilibili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilibili 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 Bilibili. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilibili has no effect on the direction of Shake Shack i.e., Shake Shack and Bilibili go up and down completely randomly.

Pair Corralation between Shake Shack and Bilibili

Given the investment horizon of 90 days Shake Shack is expected to generate 0.64 times more return on investment than Bilibili. However, Shake Shack is 1.57 times less risky than Bilibili. It trades about 0.07 of its potential returns per unit of risk. Bilibili is currently generating about 0.01 per unit of risk. If you would invest  5,784  in Shake Shack on October 27, 2024 and sell it today you would earn a total of  6,135  from holding Shake Shack or generate 106.07% return on investment over 90 days.

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

Shake Shack  vs.  Bilibili

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 persistent basic indicators, Shake Shack is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Bilibili

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bilibili 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 essential indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Shake Shack and Bilibili

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

The idea behind Shake Shack and Bilibili 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.