Correlation Between Shake Shack and RAYTHEON

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

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

Diversification Opportunities for Shake Shack and RAYTHEON

-0.04

Correlation Coefficient

Shake Shack  RAYTHEON

Good diversification

The 3 months correlation between Shake and RAYTHEON is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and RAYTHEON TECHNOLOGIES PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAYTHEON TECHNOLOGIES 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 RAYTHEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAYTHEON TECHNOLOGIES has no effect on the direction of Shake Shack i.e., Shake Shack and RAYTHEON go up and down completely randomly.

Pair Corralation between Shake Shack and RAYTHEON

Given the investment horizon of 90 days Shake Shack is expected to generate 6.07 times more return on investment than RAYTHEON. However, Shake Shack is 6.07 times more volatile than RAYTHEON TECHNOLOGIES PORATION. It trades about 0.04 of its potential returns per unit of risk. RAYTHEON TECHNOLOGIES PORATION is currently generating about -0.11 per unit of risk. If you would invest  11,426  in Shake Shack on October 26, 2024 and sell it today you would earn a total of  490.00  from holding Shake Shack or generate 4.29% return on investment over 90 days.

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

Shake Shack  vs.  RAYTHEON TECHNOLOGIES PORATION

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.

RAYTHEON TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RAYTHEON TECHNOLOGIES PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RAYTHEON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shake Shack and RAYTHEON

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

The idea behind Shake Shack and RAYTHEON TECHNOLOGIES PORATION 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.