Correlation Between First Watch and NetEase
Can any of the company-specific risk be diversified away by investing in both First Watch and NetEase 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 NetEase 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 NetEase, you can compare the effects of market volatilities on First Watch and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and NetEase.
Diversification Opportunities for First Watch and NetEase
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and NetEase is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of First Watch i.e., First Watch and NetEase go up and down completely randomly.
Pair Corralation between First Watch and NetEase
Given the investment horizon of 90 days First Watch Restaurant is expected to generate 1.24 times more return on investment than NetEase. However, First Watch is 1.24 times more volatile than NetEase. It trades about 0.13 of its potential returns per unit of risk. NetEase is currently generating about -0.05 per unit of risk. If you would invest 1,560 in First Watch Restaurant on August 29, 2024 and sell it today you would earn a total of 329.00 from holding First Watch Restaurant or generate 21.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Watch Restaurant vs. NetEase
Performance |
| Timeline |
| First Watch Restaurant |
| NetEase |
First Watch and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Watch and NetEase
The main advantage of trading using opposite First Watch and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| First Watch vs. Jack In The | First Watch vs. Potbelly Co | First Watch vs. BJs Restaurants | First Watch vs. Rave Restaurant Group |
| NetEase vs. Playstudios | NetEase vs. Talkspace | NetEase vs. Katapult Holdings Equity | NetEase vs. HUMANA INC |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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