Correlation Between First Watch and Sphere Entertainment

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

Diversification Opportunities for First Watch and Sphere Entertainment

-0.64

Correlation Coefficient

First Watch  Sphere Entertainment

Excellent diversification

The 3 months correlation between First and Sphere is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of First Watch i.e., First Watch and Sphere Entertainment go up and down completely randomly.

Pair Corralation between First Watch and Sphere Entertainment

Given the investment horizon of 90 days First Watch is expected to generate 2.21 times less return on investment than Sphere Entertainment. But when comparing it to its historical volatility, First Watch Restaurant is 1.35 times less risky than Sphere Entertainment. It trades about 0.02 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,776  in Sphere Entertainment Co on October 3, 2024 and sell it today you would earn a total of  1,256  from holding Sphere Entertainment Co or generate 45.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

First Watch Restaurant  vs.  Sphere Entertainment Co

First Watch Restaurant

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 10 (%) 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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with First Watch and Sphere Entertainment

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

The idea behind First Watch Restaurant and Sphere Entertainment 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.