Correlation Between Shake Shack and Wynn Resorts

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

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

Diversification Opportunities for Shake Shack and Wynn Resorts

0.13

Correlation Coefficient

Shake Shack  Wynn Resorts

Average diversification

The 3 months correlation between Shake and Wynn is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and Wynn Resorts Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Resorts Limited 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 Wynn Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wynn Resorts Limited has no effect on the direction of Shake Shack i.e., Shake Shack and Wynn Resorts go up and down completely randomly.

Pair Corralation between Shake Shack and Wynn Resorts

Given the investment horizon of 90 days Shake Shack is expected to under-perform the Wynn Resorts. In addition to that, Shake Shack is 1.28 times more volatile than Wynn Resorts Limited. It trades about -0.08 of its total potential returns per unit of risk. Wynn Resorts Limited is currently generating about -0.07 per unit of volatility. If you would invest  10,095  in Wynn Resorts Limited on March 1, 2024 and sell it today you would lose (744.00) from holding Wynn Resorts Limited or give up 7.37% of portfolio value over 90 days.

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

Shake Shack  vs.  Wynn Resorts Limited

Shake Shack

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shake Shack has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Wynn Resorts Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wynn Resorts Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Shake Shack and Wynn Resorts

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

The idea behind Shake Shack and Wynn Resorts Limited 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 CEOs Directory module to screen CEOs from public companies around the world.