Correlation Between First Watch and Kura Sushi

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

Diversification Opportunities for First Watch and Kura Sushi

0.76

Correlation Coefficient

First Watch  Kura Sushi

Poor diversification

The 3 months correlation between First and Kura is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Kura Sushi USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kura Sushi USA 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 Kura Sushi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kura Sushi USA has no effect on the direction of First Watch i.e., First Watch and Kura Sushi go up and down completely randomly.

Pair Corralation between First Watch and Kura Sushi

Given the investment horizon of 90 days First Watch is expected to generate 1.45 times less return on investment than Kura Sushi. But when comparing it to its historical volatility, First Watch Restaurant is 1.74 times less risky than Kura Sushi. It trades about 0.28 of its potential returns per unit of risk. Kura Sushi USA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,447  in Kura Sushi USA on September 19, 2024 and sell it today you would earn a total of  1,358  from holding Kura Sushi USA or generate 16.08% return on investment over 90 days.

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

First Watch Restaurant  vs.  Kura Sushi USA

First Watch Restaurant

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 9 (%) 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.

Kura Sushi USA

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kura Sushi USA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kura Sushi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Watch and Kura Sushi

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

The idea behind First Watch Restaurant and Kura Sushi USA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.