Correlation Between First Watch and Diamond Estates

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

Diversification Opportunities for First Watch and Diamond Estates

0.0

Correlation Coefficient

First Watch  Diamond Estates

Pay attention - limited upside

The 3 months correlation between First and Diamond is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of First Watch i.e., First Watch and Diamond Estates go up and down completely randomly.

Pair Corralation between First Watch and Diamond Estates

If you would invest  16.00  in Diamond Estates Wines on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Diamond Estates Wines or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

First Watch Restaurant  vs.  Diamond Estates Wines

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.

Diamond Estates Wines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Diamond Estates is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Watch and Diamond Estates

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

The idea behind First Watch Restaurant and Diamond Estates Wines 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.