Correlation Between Shake Shack and Companhia Paranaense

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

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

Diversification Opportunities for Shake Shack and Companhia Paranaense

-0.76

Correlation Coefficient

Shake Shack  Companhia Paranaense

Pay attention - limited upside

The 3 months correlation between Shake and Companhia is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Shake Shack i.e., Shake Shack and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Shake Shack and Companhia Paranaense

Given the investment horizon of 90 days Shake Shack is expected to under-perform the Companhia Paranaense. In addition to that, Shake Shack is 1.51 times more volatile than Companhia Paranaense de. It trades about -0.16 of its total potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.19 per unit of volatility. If you would invest  522.00  in Companhia Paranaense de on December 21, 2024 and sell it today you would earn a total of  144.00  from holding Companhia Paranaense de or generate 27.59% 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.  Companhia Paranaense de

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.

Companhia Paranaense

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Companhia Paranaense exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shake Shack and Companhia Paranaense

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

The idea behind Shake Shack and Companhia Paranaense de 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.