Correlation Between First Watch and Intchains Group

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

Diversification Opportunities for First Watch and Intchains Group

0.23

Correlation Coefficient

First Watch  Intchains Group

Modest diversification

The 3 months correlation between First and Intchains is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Intchains Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intchains Group 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 Intchains Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intchains Group has no effect on the direction of First Watch i.e., First Watch and Intchains Group go up and down completely randomly.

Pair Corralation between First Watch and Intchains Group

Given the investment horizon of 90 days First Watch is expected to generate 13.76 times less return on investment than Intchains Group. But when comparing it to its historical volatility, First Watch Restaurant is 13.09 times less risky than Intchains Group. It trades about 0.11 of its potential returns per unit of risk. Intchains Group Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  503.00  in Intchains Group Limited on October 8, 2024 and sell it today you would lose (52.00) from holding Intchains Group Limited or give up 10.34% 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.  Intchains Group Limited

First Watch Restaurant

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

Intchains Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intchains Group Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Intchains Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Watch and Intchains Group

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

The idea behind First Watch Restaurant and Intchains Group Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.