Correlation Between First Watch and Fortrea Holdings

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

Diversification Opportunities for First Watch and Fortrea Holdings

0.25

Correlation Coefficient

First Watch  Fortrea Holdings

Modest diversification

The 3 months correlation between First and Fortrea is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Fortrea Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortrea 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 Fortrea Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortrea Holdings has no effect on the direction of First Watch i.e., First Watch and Fortrea Holdings go up and down completely randomly.

Pair Corralation between First Watch and Fortrea Holdings

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 0.73 times more return on investment than Fortrea Holdings. However, First Watch Restaurant is 1.38 times less risky than Fortrea Holdings. It trades about -0.05 of its potential returns per unit of risk. Fortrea Holdings is currently generating about -0.27 per unit of risk. If you would invest  1,861  in First Watch Restaurant on December 20, 2024 and sell it today you would lose (216.00) from holding First Watch Restaurant or give up 11.61% 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.  Fortrea 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.

Fortrea Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortrea Holdings 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with First Watch and Fortrea Holdings

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

The idea behind First Watch Restaurant and Fortrea 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.