Correlation Between HF Sinclair and First Watch

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

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

Diversification Opportunities for HF Sinclair and First Watch

-0.63

Correlation Coefficient

HF Sinclair  First Watch

Excellent diversification

The 3 months correlation between DINO and First is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding HF Sinclair Corp and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant and HF Sinclair 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 HF Sinclair Corp are associated (or correlated) with First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of HF Sinclair i.e., HF Sinclair and First Watch go up and down completely randomly.

Pair Corralation between HF Sinclair and First Watch

Given the investment horizon of 90 days HF Sinclair Corp is expected to under-perform the First Watch. But the stock apears to be less risky and, when comparing its historical volatility, HF Sinclair Corp is 1.19 times less risky than First Watch. The stock trades about -0.39 of its potential returns per unit of risk. The First Watch Restaurant is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,864  in First Watch Restaurant on October 4, 2024 and sell it today you would lose (3.00) from holding First Watch Restaurant or give up 0.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

HF Sinclair Corp  vs.  First Watch Restaurant

HF Sinclair Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF Sinclair Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First Watch Restaurant

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HF Sinclair and First Watch

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

The idea behind HF Sinclair Corp and First Watch Restaurant 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..