Correlation Between First Watch and Aegon NV

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

Diversification Opportunities for First Watch and Aegon NV

0.41

Correlation Coefficient

First Watch  Aegon NV

Very weak diversification

The 3 months correlation between First and Aegon is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR 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 Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of First Watch i.e., First Watch and Aegon NV go up and down completely randomly.

Pair Corralation between First Watch and Aegon NV

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 1.01 times more return on investment than Aegon NV. However, First Watch is 1.01 times more volatile than Aegon NV ADR. It trades about 0.28 of its potential returns per unit of risk. Aegon NV ADR is currently generating about -0.26 per unit of risk. If you would invest  1,757  in First Watch Restaurant on September 19, 2024 and sell it today you would earn a total of  197.00  from holding First Watch Restaurant or generate 11.21% return on investment over 90 days.

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

First Watch Restaurant  vs.  Aegon NV ADR

First Watch Restaurant

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 9 (%) 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.

Aegon NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Watch and Aegon NV

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

The idea behind First Watch Restaurant and Aegon NV ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.