Correlation Between Sweetgreen and First Watch

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

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

Diversification Opportunities for Sweetgreen and First Watch

0.53

Correlation Coefficient

Sweetgreen  First Watch

Very weak diversification

The 3 months correlation between Sweetgreen and First is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen 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 Sweetgreen 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 Sweetgreen 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 Sweetgreen i.e., Sweetgreen and First Watch go up and down completely randomly.

Pair Corralation between Sweetgreen and First Watch

Allowing for the 90-day total investment horizon Sweetgreen is expected to generate 1.71 times less return on investment than First Watch. In addition to that, Sweetgreen is 1.23 times more volatile than First Watch Restaurant. It trades about 0.07 of its total potential returns per unit of risk. First Watch Restaurant is currently generating about 0.15 per unit of volatility. If you would invest  1,500  in First Watch Restaurant on September 12, 2024 and sell it today you would earn a total of  488.50  from holding First Watch Restaurant or generate 32.57% return on investment over 90 days.

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

Sweetgreen  vs.  First Watch Restaurant

Sweetgreen

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sweetgreen are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Sweetgreen reported solid returns over the last few months and may actually be approaching a breakup point.

First Watch Restaurant

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sweetgreen and First Watch

The main advantage of trading using opposite Sweetgreen and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sweetgreen 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 Sweetgreen 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.