Correlation Between First Watch and Postal Realty

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

Diversification Opportunities for First Watch and Postal Realty

-0.43

Correlation Coefficient

First Watch  Postal Realty

Very good diversification

The 3 months correlation between First and Postal is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Postal Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Realty Trust 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 Postal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Realty Trust has no effect on the direction of First Watch i.e., First Watch and Postal Realty go up and down completely randomly.

Pair Corralation between First Watch and Postal Realty

Given the investment horizon of 90 days First Watch Restaurant is expected to under-perform the Postal Realty. In addition to that, First Watch is 1.49 times more volatile than Postal Realty Trust. It trades about -0.01 of its total potential returns per unit of risk. Postal Realty Trust is currently generating about 0.09 per unit of volatility. If you would invest  1,271  in Postal Realty Trust on December 28, 2024 and sell it today you would earn a total of  136.00  from holding Postal Realty Trust or generate 10.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

First Watch Restaurant  vs.  Postal Realty Trust

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.

Postal Realty Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Realty Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Postal Realty may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Watch and Postal Realty

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

The idea behind First Watch Restaurant and Postal Realty Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.