Correlation Between Shake Shack and Roblox Corp

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

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

Diversification Opportunities for Shake Shack and Roblox Corp

0.45

Correlation Coefficient

Shake Shack  Roblox Corp

Very weak diversification

The 3 months correlation between Shake and Roblox is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Roblox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roblox Corp 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 Roblox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roblox Corp has no effect on the direction of Shake Shack i.e., Shake Shack and Roblox Corp go up and down completely randomly.

Pair Corralation between Shake Shack and Roblox Corp

Given the investment horizon of 90 days Shake Shack is expected to generate 0.81 times more return on investment than Roblox Corp. However, Shake Shack is 1.23 times less risky than Roblox Corp. It trades about 0.07 of its potential returns per unit of risk. Roblox Corp is currently generating about 0.05 per unit of risk. If you would invest  5,784  in Shake Shack on October 27, 2024 and sell it today you would earn a total of  6,135  from holding Shake Shack or generate 106.07% 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.  Roblox Corp

Shake Shack

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Shake Shack is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Roblox Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roblox Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Roblox Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shake Shack and Roblox Corp

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

The idea behind Shake Shack and Roblox Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.