Correlation Between First Watch and Hyatt Hotels
Can any of the company-specific risk be diversified away by investing in both First Watch and Hyatt Hotels 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 Hyatt Hotels 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 Hyatt Hotels, you can compare the effects of market volatilities on First Watch and Hyatt Hotels 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 Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Hyatt Hotels.
Diversification Opportunities for First Watch and Hyatt Hotels
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Hyatt is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels 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 Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of First Watch i.e., First Watch and Hyatt Hotels go up and down completely randomly.
Pair Corralation between First Watch and Hyatt Hotels
Given the investment horizon of 90 days First Watch Restaurant is expected to generate 1.42 times more return on investment than Hyatt Hotels. However, First Watch is 1.42 times more volatile than Hyatt Hotels. It trades about -0.18 of its potential returns per unit of risk. Hyatt Hotels is currently generating about -0.38 per unit of risk. If you would invest 1,921 in First Watch Restaurant on January 4, 2025 and sell it today you would lose (302.00) from holding First Watch Restaurant or give up 15.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Watch Restaurant vs. Hyatt Hotels
Performance |
| Timeline |
| First Watch Restaurant |
| Hyatt Hotels |
First Watch and Hyatt Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Watch and Hyatt Hotels
The main advantage of trading using opposite First Watch and Hyatt Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, Hyatt Hotels 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 Hyatt Hotels will offset losses from the drop in Hyatt Hotels' 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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