Correlation Between Univest Pennsylvania and First Watch

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

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

Diversification Opportunities for Univest Pennsylvania and First Watch

0.75

Correlation Coefficient

Univest Pennsylvania  First Watch

Poor diversification

The 3 months correlation between Univest and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Univest Pennsylvania 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 Univest Pennsylvania 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 Univest Pennsylvania 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 Univest Pennsylvania i.e., Univest Pennsylvania and First Watch go up and down completely randomly.

Pair Corralation between Univest Pennsylvania and First Watch

Given the investment horizon of 90 days Univest Pennsylvania is expected to generate 0.5 times more return on investment than First Watch. However, Univest Pennsylvania is 2.01 times less risky than First Watch. It trades about -0.02 of its potential returns per unit of risk. First Watch Restaurant is currently generating about -0.03 per unit of risk. If you would invest  2,942  in Univest Pennsylvania on December 29, 2024 and sell it today you would lose (77.00) from holding Univest Pennsylvania or give up 2.62% of portfolio value over 90 days.

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

Univest Pennsylvania  vs.  First Watch Restaurant

Univest Pennsylvania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Univest Pennsylvania has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Univest Pennsylvania is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

First Watch Restaurant

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Watch Restaurant has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Univest Pennsylvania and First Watch

The main advantage of trading using opposite Univest Pennsylvania and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Univest Pennsylvania 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 Univest Pennsylvania 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.