Correlation Between SL Green and Shake Shack
Can any of the company-specific risk be diversified away by investing in both SL Green and Shake Shack 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 SL Green and Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SL Green Realty and Shake Shack, you can compare the effects of market volatilities on SL Green and Shake Shack 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 SL Green with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of SL Green and Shake Shack.
Diversification Opportunities for SL Green and Shake Shack
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SLG and Shake is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and SL Green 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 SL Green Realty are associated (or correlated) with Shake Shack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shake Shack has no effect on the direction of SL Green i.e., SL Green and Shake Shack go up and down completely randomly.
Pair Corralation between SL Green and Shake Shack
Considering the 90-day investment horizon SL Green Realty is expected to generate 0.29 times more return on investment than Shake Shack. However, SL Green Realty is 3.42 times less risky than Shake Shack. It trades about -0.22 of its potential returns per unit of risk. Shake Shack is currently generating about -0.1 per unit of risk. If you would invest 6,558 in SL Green Realty on December 4, 2024 and sell it today you would lose (433.00) from holding SL Green Realty or give up 6.6% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SL Green Realty vs. Shake Shack
Performance |
Timeline |
SL Green Realty |
Shake Shack |
SL Green and Shake Shack Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SL Green and Shake Shack
The main advantage of trading using opposite SL Green and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SL Green position performs unexpectedly, Shake Shack 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 Shake Shack will offset losses from the drop in Shake Shack's long position.SL Green vs. Boston Properties | SL Green vs. Douglas Emmett | SL Green vs. Kilroy Realty Corp | SL Green vs. Alexandria Real Estate |
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Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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