Correlation Between First Watch and Levi Strauss

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

Diversification Opportunities for First Watch and Levi Strauss

0.85

Correlation Coefficient

First Watch  Levi Strauss

Very poor diversification

The 3 months correlation between First and Levi is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss 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 Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of First Watch i.e., First Watch and Levi Strauss go up and down completely randomly.

Pair Corralation between First Watch and Levi Strauss

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 1.52 times more return on investment than Levi Strauss. However, First Watch is 1.52 times more volatile than Levi Strauss Co. It trades about -0.01 of its potential returns per unit of risk. Levi Strauss Co is currently generating about -0.05 per unit of risk. If you would invest  1,853  in First Watch Restaurant on December 28, 2024 and sell it today you would lose (96.00) from holding First Watch Restaurant or give up 5.18% of portfolio value over 90 days.

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

First Watch Restaurant  vs.  Levi Strauss Co

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 nearly stable basic indicators, First Watch is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Levi Strauss

Risk-Adjusted Performance

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Watch and Levi Strauss

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

The idea behind First Watch Restaurant and Levi Strauss Co 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.