Correlation Between First Watch and Barings BDC

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

Diversification Opportunities for First Watch and Barings BDC

0.53

Correlation Coefficient

First Watch  Barings BDC

Very weak diversification

The 3 months correlation between First and Barings is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Barings BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings BDC 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 Barings BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings BDC has no effect on the direction of First Watch i.e., First Watch and Barings BDC go up and down completely randomly.

Pair Corralation between First Watch and Barings BDC

Given the investment horizon of 90 days First Watch Restaurant is expected to under-perform the Barings BDC. In addition to that, First Watch is 2.99 times more volatile than Barings BDC. It trades about -0.03 of its total potential returns per unit of risk. Barings BDC is currently generating about 0.07 per unit of volatility. If you would invest  924.00  in Barings BDC on December 29, 2024 and sell it today you would earn a total of  37.00  from holding Barings BDC or generate 4.0% 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.  Barings BDC

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.

Barings BDC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Watch and Barings BDC

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

The idea behind First Watch Restaurant and Barings BDC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.