Correlation Between First Watch and MARRIOTT

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

Diversification Opportunities for First Watch and MARRIOTT

-0.19

Correlation Coefficient

First Watch  MARRIOTT

Good diversification

The 3 months correlation between First and MARRIOTT is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and MARRIOTT INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT INTERNATIONAL 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 MARRIOTT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARRIOTT INTERNATIONAL has no effect on the direction of First Watch i.e., First Watch and MARRIOTT go up and down completely randomly.

Pair Corralation between First Watch and MARRIOTT

Given the investment horizon of 90 days First Watch Restaurant is expected to under-perform the MARRIOTT. In addition to that, First Watch is 3.6 times more volatile than MARRIOTT INTERNATIONAL INC. It trades about -0.06 of its total potential returns per unit of risk. MARRIOTT INTERNATIONAL INC is currently generating about -0.17 per unit of volatility. If you would invest  9,889  in MARRIOTT INTERNATIONAL INC on October 9, 2024 and sell it today you would lose (479.00) from holding MARRIOTT INTERNATIONAL INC or give up 4.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

First Watch Restaurant  vs.  MARRIOTT INTERNATIONAL INC

First Watch Restaurant

Risk-Adjusted Performance

16 of 100

Solid

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 weak basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

MARRIOTT INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARRIOTT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Watch and MARRIOTT

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

The idea behind First Watch Restaurant and MARRIOTT INTERNATIONAL INC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.