Correlation Between First Watch and Dine Brands

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

Diversification Opportunities for First Watch and Dine Brands

0.36

Correlation Coefficient

First Watch  Dine Brands

Weak diversification

The 3 months correlation between First and Dine is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Dine Brands Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dine Brands Global 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 Dine Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dine Brands Global has no effect on the direction of First Watch i.e., First Watch and Dine Brands go up and down completely randomly.

Pair Corralation between First Watch and Dine Brands

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 1.09 times more return on investment than Dine Brands. However, First Watch is 1.09 times more volatile than Dine Brands Global. It trades about -0.02 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.09 per unit of risk. If you would invest  1,870  in First Watch Restaurant on December 27, 2024 and sell it today you would lose (133.00) from holding First Watch Restaurant or give up 7.11% of portfolio value over 90 days.

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

First Watch Restaurant  vs.  Dine Brands Global

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 nearly stable basic indicators, First Watch is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Dine Brands Global

Risk-Adjusted Performance

Very Weak

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

Pair Trading with First Watch and Dine Brands

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

The idea behind First Watch Restaurant and Dine Brands Global 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 Transaction History module to view history of all your transactions and understand their impact on performance.