Correlation Between Lavoro Limited and First Watch
Can any of the company-specific risk be diversified away by investing in both Lavoro Limited 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 Lavoro Limited and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lavoro Limited Class and First Watch Restaurant, you can compare the effects of market volatilities on Lavoro Limited 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 Lavoro Limited with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lavoro Limited and First Watch.
Diversification Opportunities for Lavoro Limited and First Watch
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lavoro and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lavoro Limited Class 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 Lavoro Limited 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 Lavoro Limited Class 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 Lavoro Limited i.e., Lavoro Limited and First Watch go up and down completely randomly.
Pair Corralation between Lavoro Limited and First Watch
Given the investment horizon of 90 days Lavoro Limited Class is expected to under-perform the First Watch. In addition to that, Lavoro Limited is 1.89 times more volatile than First Watch Restaurant. It trades about -0.46 of its total potential returns per unit of risk. First Watch Restaurant is currently generating about 0.01 per unit of volatility. If you would invest 1,888 in First Watch Restaurant on October 23, 2024 and sell it today you would lose (1.00) from holding First Watch Restaurant or give up 0.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Lavoro Limited Class vs. First Watch Restaurant
Performance |
| Timeline |
| Lavoro Limited Class |
| First Watch Restaurant |
Lavoro Limited and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lavoro Limited and First Watch
The main advantage of trading using opposite Lavoro Limited and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lavoro Limited 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.| Lavoro Limited vs. BJs Restaurants | Lavoro Limited vs. Texas Roadhouse | Lavoro Limited vs. First Watch Restaurant | Lavoro Limited vs. The Cheesecake Factory |
| First Watch vs. Dine Brands Global | First Watch vs. Bloomin Brands | First Watch vs. BJs Restaurants | First Watch vs. The Cheesecake Factory |
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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