Correlation Between Shake Shack and Vornado Realty

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

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

Diversification Opportunities for Shake Shack and Vornado Realty

-0.04

Correlation Coefficient

Shake Shack  Vornado Realty

Good diversification

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

Pair Corralation between Shake Shack and Vornado Realty

If you would invest  0.00  in Vornado Realty Trust on October 23, 2024 and sell it today you would earn a total of  0.00  from holding Vornado Realty Trust or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

Shake Shack  vs.  Vornado Realty Trust

Shake Shack

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Shake Shack may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vornado Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Vornado Realty is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Shake Shack and Vornado Realty

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

The idea behind Shake Shack and Vornado Realty Trust 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.