Correlation Between First Watch and Booking Holdings

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

Diversification Opportunities for First Watch and Booking Holdings

0.51

Correlation Coefficient

First Watch  Booking Holdings

Very weak diversification

The 3 months correlation between First and Booking is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of First Watch i.e., First Watch and Booking Holdings go up and down completely randomly.

Pair Corralation between First Watch and Booking Holdings

Given the investment horizon of 90 days First Watch Restaurant is expected to under-perform the Booking Holdings. In addition to that, First Watch is 1.7 times more volatile than Booking Holdings. It trades about -0.03 of its total potential returns per unit of risk. Booking Holdings is currently generating about -0.05 per unit of volatility. If you would invest  498,067  in Booking Holdings on December 28, 2024 and sell it today you would lose (34,643) from holding Booking Holdings or give up 6.96% of portfolio value over 90 days.

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

First Watch Restaurant  vs.  Booking Holdings

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.

Booking Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Booking Holdings 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.

Pair Trading with First Watch and Booking Holdings

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

The idea behind First Watch Restaurant and Booking Holdings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.