Correlation Between First Watch and Yuexiu Transport
Can any of the company-specific risk be diversified away by investing in both First Watch and Yuexiu Transport 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 Yuexiu Transport 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 Yuexiu Transport Infrastructure, you can compare the effects of market volatilities on First Watch and Yuexiu Transport 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 Yuexiu Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Yuexiu Transport.
Diversification Opportunities for First Watch and Yuexiu Transport
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Yuexiu is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf 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 Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of First Watch i.e., First Watch and Yuexiu Transport go up and down completely randomly.
Pair Corralation between First Watch and Yuexiu Transport
Given the investment horizon of 90 days First Watch is expected to generate 6.65 times less return on investment than Yuexiu Transport. In addition to that, First Watch is 1.01 times more volatile than Yuexiu Transport Infrastructure. It trades about 0.01 of its total potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about 0.1 per unit of volatility. If you would invest 32.00 in Yuexiu Transport Infrastructure on September 2, 2024 and sell it today you would earn a total of 26.00 from holding Yuexiu Transport Infrastructure or generate 81.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Watch Restaurant vs. Yuexiu Transport Infrastructur
Performance |
| Timeline |
| First Watch Restaurant |
| Yuexiu Transport Inf |
First Watch and Yuexiu Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Watch and Yuexiu Transport
The main advantage of trading using opposite First Watch and Yuexiu Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, Yuexiu Transport 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 Yuexiu Transport will offset losses from the drop in Yuexiu Transport's long position.The idea behind First Watch Restaurant and Yuexiu Transport Infrastructure 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.| Yuexiu Transport vs. Zhejiang Expressway Co | Yuexiu Transport vs. Jiangsu Expressway Co | Yuexiu Transport vs. Jiangsu Expressway | Yuexiu Transport vs. Verra Mobility Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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