Correlation Between BJs Restaurants and Shake Shack

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

By analyzing existing cross correlation between BJs Restaurants and Shake Shack, you can compare the effects of market volatilities on BJs Restaurants 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 BJs Restaurants with a short position of Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Shake Shack.

Diversification Opportunities for BJs Restaurants and Shake Shack

0.54

Correlation Coefficient

BJs Restaurants  Shake Shack

Very weak diversification

The 3 months correlation between BJs and Shake is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack and BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants i.e., BJs Restaurants and Shake Shack go up and down completely randomly.

Pair Corralation between BJs Restaurants and Shake Shack

Given the investment horizon of 90 days BJs Restaurants is expected to under-perform the Shake Shack. But the stock apears to be less risky and, when comparing its historical volatility, BJs Restaurants is 1.3 times less risky than Shake Shack. The stock trades about -0.05 of its potential returns per unit of risk. The Shake Shack is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,868  in Shake Shack on May 6, 2025 and sell it today you would earn a total of  1,316  from holding Shake Shack or generate 13.34% return on investment over 90 days.

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

BJs Restaurants  vs.  Shake Shack

BJs Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Shake Shack

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 6 (%) 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.

Pair Trading with BJs Restaurants and Shake Shack

The main advantage of trading using opposite BJs Restaurants and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants 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.

The idea behind BJs Restaurants and Shake Shack 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.