Correlation Between Shake Shack and JPM P

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

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

Diversification Opportunities for Shake Shack and JPM P

-0.81

Correlation Coefficient

Shake Shack  JPM P

Pay attention - limited upside

The 3 months correlation between Shake and JPM is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and JPM P J in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM P J 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 JPM P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM P J has no effect on the direction of Shake Shack i.e., Shake Shack and JPM P go up and down completely randomly.

Pair Corralation between Shake Shack and JPM P

Given the investment horizon of 90 days Shake Shack is expected to generate 3.25 times more return on investment than JPM P. However, Shake Shack is 3.25 times more volatile than JPM P J. It trades about 0.07 of its potential returns per unit of risk. JPM P J is currently generating about 0.0 per unit of risk. If you would invest  5,636  in Shake Shack on October 4, 2024 and sell it today you would earn a total of  7,344  from holding Shake Shack or generate 130.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Shake Shack  vs.  JPM P J

Shake Shack

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Shake Shack disclosed solid returns over the last few months and may actually be approaching a breakup point.

JPM P J

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPM P J has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Preferred Stock's forward-looking indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Pair Trading with Shake Shack and JPM P

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

The idea behind Shake Shack and JPM P J 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.