Correlation Between Highway Holdings and First Watch
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and First Watch 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 Highway Holdings and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highway Holdings Limited and First Watch Restaurant, you can compare the effects of market volatilities on Highway Holdings and First Watch 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 Highway Holdings with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and First Watch.
Diversification Opportunities for Highway Holdings and First Watch
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Highway and First is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant and Highway Holdings 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 Highway Holdings Limited are associated (or correlated) with First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of Highway Holdings i.e., Highway Holdings and First Watch go up and down completely randomly.
Pair Corralation between Highway Holdings and First Watch
Given the investment horizon of 90 days Highway Holdings is expected to generate 5.16 times less return on investment than First Watch. In addition to that, Highway Holdings is 1.19 times more volatile than First Watch Restaurant. It trades about 0.01 of its total potential returns per unit of risk. First Watch Restaurant is currently generating about 0.03 per unit of volatility. If you would invest 1,485 in First Watch Restaurant on September 4, 2024 and sell it today you would earn a total of 401.00 from holding First Watch Restaurant or generate 27.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Highway Holdings Limited vs. First Watch Restaurant
Performance |
| Timeline |
| Highway Holdings |
| First Watch Restaurant |
Highway Holdings and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and First Watch
The main advantage of trading using opposite Highway Holdings and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, First Watch 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 First Watch will offset losses from the drop in First Watch's long position.| Highway Holdings vs. Deswell Industries | Highway Holdings vs. Euro Tech Holdings | Highway Holdings vs. China Natural Resources | Highway Holdings vs. Arts Way Manufacturing Co |
| First Watch vs. Hyatt Hotels | First Watch vs. Smart Share Global | First Watch vs. Sweetgreen | First Watch vs. Wyndham Hotels Resorts |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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