Correlation Between First Watch and Fortune Rise

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

Diversification Opportunities for First Watch and Fortune Rise

0.61

Correlation Coefficient

First Watch  Fortune Rise

Poor diversification

The 3 months correlation between First and Fortune is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Fortune Rise Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Rise Acquisition 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 Fortune Rise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Rise Acquisition has no effect on the direction of First Watch i.e., First Watch and Fortune Rise go up and down completely randomly.

Pair Corralation between First Watch and Fortune Rise

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 4.4 times more return on investment than Fortune Rise. However, First Watch is 4.4 times more volatile than Fortune Rise Acquisition. It trades about 0.03 of its potential returns per unit of risk. Fortune Rise Acquisition is currently generating about 0.05 per unit of risk. If you would invest  1,527  in First Watch Restaurant on October 5, 2024 and sell it today you would earn a total of  437.00  from holding First Watch Restaurant or generate 28.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.31%
Values	Daily Returns

First Watch Restaurant  vs.  Fortune Rise Acquisition

First Watch Restaurant

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 13 (%) 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.

Fortune Rise Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Rise Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fortune Rise is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Watch and Fortune Rise

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

The idea behind First Watch Restaurant and Fortune Rise Acquisition 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.