Correlation Between Shake Shack and Golden Heaven

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

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

Diversification Opportunities for Shake Shack and Golden Heaven

0.52

Correlation Coefficient

Shake Shack  Golden Heaven

Very weak diversification

The 3 months correlation between Shake and Golden is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Golden Heaven Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Heaven Group 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 Golden Heaven. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Heaven Group has no effect on the direction of Shake Shack i.e., Shake Shack and Golden Heaven go up and down completely randomly.

Pair Corralation between Shake Shack and Golden Heaven

Given the investment horizon of 90 days Shake Shack is expected to generate 0.5 times more return on investment than Golden Heaven. However, Shake Shack is 1.98 times less risky than Golden Heaven. It trades about -0.1 of its potential returns per unit of risk. Golden Heaven Group is currently generating about -0.32 per unit of risk. If you would invest  11,517  in Shake Shack on December 4, 2024 and sell it today you would lose (1,415) from holding Shake Shack or give up 12.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Shake Shack  vs.  Golden Heaven Group

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.

Golden Heaven Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Heaven Group 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 technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Shake Shack and Golden Heaven

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

The idea behind Shake Shack and Golden Heaven Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.