Correlation Between First Watch and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both First Watch and Monster Beverage 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 Monster Beverage 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 Monster Beverage Corp, you can compare the effects of market volatilities on First Watch and Monster Beverage 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 Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Monster Beverage.

Diversification Opportunities for First Watch and Monster Beverage

-0.59

Correlation Coefficient

First Watch  Monster Beverage

Excellent diversification

The 3 months correlation between First and Monster is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp 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 Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of First Watch i.e., First Watch and Monster Beverage go up and down completely randomly.

Pair Corralation between First Watch and Monster Beverage

Given the investment horizon of 90 days First Watch Restaurant is expected to under-perform the Monster Beverage. In addition to that, First Watch is 2.0 times more volatile than Monster Beverage Corp. It trades about -0.04 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.11 per unit of volatility. If you would invest  5,172  in Monster Beverage Corp on December 20, 2024 and sell it today you would earn a total of  515.00  from holding Monster Beverage Corp or generate 9.96% return on investment over 90 days.

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

First Watch Restaurant  vs.  Monster Beverage Corp

First Watch Restaurant

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Watch Restaurant has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Monster Beverage Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Watch and Monster Beverage

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

The idea behind First Watch Restaurant and Monster Beverage Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.