Correlation Between Minerals Technologies and First Watch

Can any of the company-specific risk be diversified away by investing in both Minerals Technologies and First Watch 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 Minerals Technologies and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Minerals Technologies and First Watch Restaurant, you can compare the effects of market volatilities on Minerals Technologies and First Watch 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 Minerals Technologies with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Minerals Technologies and First Watch.

Diversification Opportunities for Minerals Technologies and First Watch

0.52

Correlation Coefficient

Minerals Technologies  First Watch

Very weak diversification

The 3 months correlation between Minerals and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Minerals Technologies and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant and Minerals Technologies 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 Minerals Technologies are associated (or correlated) with First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of Minerals Technologies i.e., Minerals Technologies and First Watch go up and down completely randomly.

Pair Corralation between Minerals Technologies and First Watch

Considering the 90-day investment horizon Minerals Technologies is expected to generate 64.76 times less return on investment than First Watch. But when comparing it to its historical volatility, Minerals Technologies is 1.82 times less risky than First Watch. It trades about 0.01 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,372  in First Watch Restaurant on October 6, 2024 and sell it today you would earn a total of  610.00  from holding First Watch Restaurant or generate 44.46% return on investment over 90 days.

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

Minerals Technologies  vs.  First Watch Restaurant

Minerals Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Minerals Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Minerals Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Minerals Technologies and First Watch

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

The idea behind Minerals Technologies and First Watch Restaurant 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.