Correlation Between Shake Shack and 17 Education

Can any of the company-specific risk be diversified away by investing in both Shake Shack and 17 Education 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 17 Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shake Shack and 17 Education Technology, you can compare the effects of market volatilities on Shake Shack and 17 Education 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 17 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and 17 Education.

Diversification Opportunities for Shake Shack and 17 Education

-0.83

Correlation Coefficient

Shake Shack  17 Education

Pay attention - limited upside

The 3 months correlation between Shake and 17 Education is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and 17 Education Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 17 Education Technology 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 17 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 17 Education Technology has no effect on the direction of Shake Shack i.e., Shake Shack and 17 Education go up and down completely randomly.

Pair Corralation between Shake Shack and 17 Education

Given the investment horizon of 90 days Shake Shack is expected to generate 0.73 times more return on investment than 17 Education. However, Shake Shack is 1.37 times less risky than 17 Education. It trades about -0.01 of its potential returns per unit of risk. 17 Education Technology is currently generating about -0.37 per unit of risk. If you would invest  13,373  in Shake Shack on September 29, 2024 and sell it today you would lose (118.00) from holding Shake Shack or give up 0.88% of portfolio value over 90 days.

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

Shake Shack  vs.  17 Education Technology

Shake Shack

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 14 (%) 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.

17 Education Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 17 Education Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Shake Shack and 17 Education

The main advantage of trading using opposite Shake Shack and 17 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack position performs unexpectedly, 17 Education 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 17 Education will offset losses from the drop in 17 Education's long position.

The idea behind Shake Shack and 17 Education Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.