Correlation Between Shake Shack and Nexstar Broadcasting

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

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

Diversification Opportunities for Shake Shack and Nexstar Broadcasting

0.47

Correlation Coefficient

Shake Shack  Nexstar Broadcasting

Very weak diversification

The 3 months correlation between Shake and Nexstar is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of Shake Shack i.e., Shake Shack and Nexstar Broadcasting go up and down completely randomly.

Pair Corralation between Shake Shack and Nexstar Broadcasting

Given the investment horizon of 90 days Shake Shack is expected to generate 1.06 times more return on investment than Nexstar Broadcasting. However, Shake Shack is 1.06 times more volatile than Nexstar Broadcasting Group. It trades about 0.19 of its potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about 0.01 per unit of risk. If you would invest  10,180  in Shake Shack on September 16, 2024 and sell it today you would earn a total of  2,979  from holding Shake Shack or generate 29.26% return on investment over 90 days.

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

Shake Shack  vs.  Nexstar Broadcasting Group

Shake Shack

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 14 (%) 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.

Nexstar Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexstar Broadcasting Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nexstar Broadcasting is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Shake Shack and Nexstar Broadcasting

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

The idea behind Shake Shack and Nexstar Broadcasting 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.