Correlation Between Shake Shack and Park Hotels
Can any of the company-specific risk be diversified away by investing in both Shake Shack and Park Hotels 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 Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shake Shack and Park Hotels Resorts, you can compare the effects of market volatilities on Shake Shack and Park Hotels 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 Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and Park Hotels.
Diversification Opportunities for Shake Shack and Park Hotels
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shake and Park is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Park Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Hotels Resorts 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 Park Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Hotels Resorts has no effect on the direction of Shake Shack i.e., Shake Shack and Park Hotels go up and down completely randomly.
Pair Corralation between Shake Shack and Park Hotels
Given the investment horizon of 90 days Shake Shack is expected to under-perform the Park Hotels. In addition to that, Shake Shack is 2.06 times more volatile than Park Hotels Resorts. It trades about -0.09 of its total potential returns per unit of risk. Park Hotels Resorts is currently generating about -0.18 per unit of volatility. If you would invest 1,470 in Park Hotels Resorts on December 1, 2024 and sell it today you would lose (242.00) from holding Park Hotels Resorts or give up 16.46% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Shake Shack vs. Park Hotels Resorts
Performance |
Timeline |
Shake Shack |
Park Hotels Resorts |
Shake Shack and Park Hotels Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Shake Shack and Park Hotels
The main advantage of trading using opposite Shake Shack and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, Park Hotels 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 Park Hotels will offset losses from the drop in Park Hotels' long position.Shake Shack vs. Dominos Pizza Common | Shake Shack vs. Papa Johns International | Shake Shack vs. Chipotle Mexican Grill | Shake Shack vs. Darden Restaurants |
Park Hotels vs. Diamondrock Hospitality | Park Hotels vs. Ryman Hospitality Properties | Park Hotels vs. Pebblebrook Hotel Trust | Park Hotels vs. Sunstone Hotel Investors |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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