Correlation Between First Watch and Anglo American
Can any of the company-specific risk be diversified away by investing in both First Watch and Anglo American 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 Anglo American 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 Anglo American Platinum, you can compare the effects of market volatilities on First Watch and Anglo American 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 Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Anglo American.
Diversification Opportunities for First Watch and Anglo American
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Anglo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Anglo American Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American Platinum 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American Platinum has no effect on the direction of First Watch i.e., First Watch and Anglo American go up and down completely randomly.
Pair Corralation between First Watch and Anglo American
Given the investment horizon of 90 days First Watch is expected to generate 1.15 times less return on investment than Anglo American. But when comparing it to its historical volatility, First Watch Restaurant is 1.19 times less risky than Anglo American. It trades about 0.02 of its potential returns per unit of risk. Anglo American Platinum is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,355 in Anglo American Platinum on September 1, 2024 and sell it today you would lose (63.00) from holding Anglo American Platinum or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
First Watch Restaurant vs. Anglo American Platinum
Performance |
| Timeline |
| First Watch Restaurant |
| Anglo American Platinum |
First Watch and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Watch and Anglo American
The main advantage of trading using opposite First Watch and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American's long position.| First Watch vs. Dine Brands Global | First Watch vs. Bloomin Brands | First Watch vs. BJs Restaurants | First Watch vs. The Cheesecake Factory |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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