Correlation Between First Watch and Mountain Crest

Can any of the company-specific risk be diversified away by investing in both First Watch and Mountain Crest 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 First Watch and Mountain Crest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Watch Restaurant and Mountain Crest Acquisition, you can compare the effects of market volatilities on First Watch and Mountain Crest 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 First Watch with a short position of Mountain Crest. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Mountain Crest.

Diversification Opportunities for First Watch and Mountain Crest

-0.69

Correlation Coefficient

First Watch  Mountain Crest

Excellent diversification

The 3 months correlation between First and Mountain is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Mountain Crest Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Crest Acqui and First Watch 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 First Watch Restaurant are associated (or correlated) with Mountain Crest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Crest Acqui has no effect on the direction of First Watch i.e., First Watch and Mountain Crest go up and down completely randomly.

Pair Corralation between First Watch and Mountain Crest

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 0.13 times more return on investment than Mountain Crest. However, First Watch Restaurant is 7.44 times less risky than Mountain Crest. It trades about 0.03 of its potential returns per unit of risk. Mountain Crest Acquisition is currently generating about -0.2 per unit of risk. If you would invest  1,485  in First Watch Restaurant on September 4, 2024 and sell it today you would earn a total of  379.00  from holding First Watch Restaurant or generate 25.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	11.92%
Values	Daily Returns

First Watch Restaurant  vs.  Mountain Crest Acquisition

First Watch Restaurant

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

Mountain Crest Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Crest Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Mountain Crest is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Watch and Mountain Crest

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

The idea behind First Watch Restaurant and Mountain Crest Acquisition 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.