Correlation Between Shake Shack and Boqii Holding

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

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

Diversification Opportunities for Shake Shack and Boqii Holding

0.71

Correlation Coefficient

Shake Shack  Boqii Holding

Poor diversification

The 3 months correlation between Shake and Boqii is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Boqii Holding Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boqii Holding Limited 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 Boqii Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boqii Holding Limited has no effect on the direction of Shake Shack i.e., Shake Shack and Boqii Holding go up and down completely randomly.

Pair Corralation between Shake Shack and Boqii Holding

Given the investment horizon of 90 days Shake Shack is expected to under-perform the Boqii Holding. But the stock apears to be less risky and, when comparing its historical volatility, Shake Shack is 2.03 times less risky than Boqii Holding. The stock trades about -0.16 of its potential returns per unit of risk. The Boqii Holding Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Boqii Holding Limited on December 18, 2024 and sell it today you would lose (41.00) from holding Boqii Holding Limited or give up 13.67% of portfolio value over 90 days.

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

Shake Shack  vs.  Boqii Holding Limited

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.

Boqii Holding Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boqii Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Boqii Holding is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Shake Shack and Boqii Holding

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

The idea behind Shake Shack and Boqii Holding Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.