Correlation Between Analog Devices and First Watch
Can any of the company-specific risk be diversified away by investing in both Analog Devices 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 Analog Devices and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and First Watch Restaurant, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and First Watch.
Diversification Opportunities for Analog Devices and First Watch
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Analog and First is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and First Watch go up and down completely randomly.
Pair Corralation between Analog Devices and First Watch
Considering the 90-day investment horizon Analog Devices is expected to generate 0.72 times more return on investment than First Watch. However, Analog Devices is 1.39 times less risky than First Watch. It trades about 0.05 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.01 per unit of risk. If you would invest 18,202 in Analog Devices on September 2, 2024 and sell it today you would earn a total of 3,603 from holding Analog Devices or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. First Watch Restaurant
Performance |
| Timeline |
| Analog Devices |
| First Watch Restaurant |
Analog Devices and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and First Watch
The main advantage of trading using opposite Analog Devices and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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.| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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