Correlation Between First Watch and UNITEDHEALTH

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

Diversification Opportunities for First Watch and UNITEDHEALTH

-0.67

Correlation Coefficient

First Watch  UNITEDHEALTH

Excellent diversification

The 3 months correlation between First and UNITEDHEALTH is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and UNITEDHEALTH GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITEDHEALTH GROUP INC 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 UNITEDHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITEDHEALTH GROUP INC has no effect on the direction of First Watch i.e., First Watch and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between First Watch and UNITEDHEALTH

Given the investment horizon of 90 days First Watch is expected to generate 154.64 times less return on investment than UNITEDHEALTH. But when comparing it to its historical volatility, First Watch Restaurant is 45.38 times less risky than UNITEDHEALTH. It trades about 0.03 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,199  in UNITEDHEALTH GROUP INC on October 6, 2024 and sell it today you would lose (433.00) from holding UNITEDHEALTH GROUP INC or give up 5.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.89%
Values	Daily Returns

First Watch Restaurant  vs.  UNITEDHEALTH GROUP INC

First Watch Restaurant

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 15 (%) 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.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Watch and UNITEDHEALTH

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

The idea behind First Watch Restaurant and UNITEDHEALTH GROUP 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.