Correlation Between First Watch and Corporacion America

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

Diversification Opportunities for First Watch and Corporacion America

0.67

Correlation Coefficient

First Watch  Corporacion America

Poor diversification

The 3 months correlation between First and Corporacion is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Corporacion America Airports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion America 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 Corporacion America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion America has no effect on the direction of First Watch i.e., First Watch and Corporacion America go up and down completely randomly.

Pair Corralation between First Watch and Corporacion America

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 0.92 times more return on investment than Corporacion America. However, First Watch Restaurant is 1.09 times less risky than Corporacion America. It trades about 0.01 of its potential returns per unit of risk. Corporacion America Airports is currently generating about -0.01 per unit of risk. 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 Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

First Watch Restaurant  vs.  Corporacion America Airports

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.

Corporacion America

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Corporacion America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Watch and Corporacion America

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

The idea behind First Watch Restaurant and Corporacion America Airports 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.