Correlation Between First Watch and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both First Watch and Highway Holdings 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 Highway Holdings 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 Highway Holdings Limited, you can compare the effects of market volatilities on First Watch and Highway Holdings 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 Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Highway Holdings.
Diversification Opportunities for First Watch and Highway Holdings
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Highway is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of First Watch i.e., First Watch and Highway Holdings go up and down completely randomly.
Pair Corralation between First Watch and Highway Holdings
Given the investment horizon of 90 days First Watch Restaurant is expected to generate 0.74 times more return on investment than Highway Holdings. However, First Watch Restaurant is 1.36 times less risky than Highway Holdings. It trades about 0.11 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.05 per unit of risk. If you would invest 1,568 in First Watch Restaurant on September 3, 2024 and sell it today you would earn a total of 341.00 from holding First Watch Restaurant or generate 21.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Watch Restaurant vs. Highway Holdings Limited
Performance |
| Timeline |
| First Watch Restaurant |
| Highway Holdings |
First Watch and Highway Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Watch and Highway Holdings
The main advantage of trading using opposite First Watch and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, Highway Holdings 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 Highway Holdings will offset losses from the drop in Highway Holdings' long position.| First Watch vs. Highway Holdings Limited | First Watch vs. QCR Holdings | First Watch vs. Partner Communications | First Watch vs. Acumen Pharmaceuticals |
| Highway Holdings vs. Deswell Industries | Highway Holdings vs. SCOR PK | Highway Holdings vs. HUMANA INC | Highway Holdings vs. Aquagold International |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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