Correlation Between Shake Shack and Mountain Crest

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

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

Diversification Opportunities for Shake Shack and Mountain Crest

0.03

Correlation Coefficient

Shake Shack  Mountain Crest

Significant diversification

The 3 months correlation between Shake and Mountain is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack 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 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 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 Shake Shack i.e., Shake Shack and Mountain Crest go up and down completely randomly.

Pair Corralation between Shake Shack and Mountain Crest

If you would invest  10,825  in Shake Shack on October 5, 2024 and sell it today you would earn a total of  2,502  from holding Shake Shack or generate 23.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Shake Shack  vs.  Mountain Crest Acquisition

Shake Shack

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shake Shack are ranked lower than 12 (%) 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.

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Shake Shack and Mountain Crest

The main advantage of trading using opposite Shake Shack and Mountain Crest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shake Shack 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 Shake Shack 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.