Correlation Between Shake Shack and PT Semen

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

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

Diversification Opportunities for Shake Shack and PT Semen

-0.73

Correlation Coefficient

Shake Shack  PT Semen

Pay attention - limited upside

The 3 months correlation between Shake and PSGTF is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and PT Semen Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Semen Indonesia 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 PT Semen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Semen Indonesia has no effect on the direction of Shake Shack i.e., Shake Shack and PT Semen go up and down completely randomly.

Pair Corralation between Shake Shack and PT Semen

Given the investment horizon of 90 days Shake Shack is expected to generate 1.14 times more return on investment than PT Semen. However, Shake Shack is 1.14 times more volatile than PT Semen Indonesia. It trades about 0.02 of its potential returns per unit of risk. PT Semen Indonesia is currently generating about -0.16 per unit of risk. If you would invest  13,073  in Shake Shack on October 10, 2024 and sell it today you would earn a total of  130.00  from holding Shake Shack or generate 0.99% 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.  PT Semen Indonesia

Shake Shack

Risk-Adjusted Performance

11 of 100

Good

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.

PT Semen Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Semen Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Shake Shack and PT Semen

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

The idea behind Shake Shack and PT Semen Indonesia 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.