Correlation Between Rave Restaurant and First Watch
Can any of the company-specific risk be diversified away by investing in both Rave Restaurant 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 Rave Restaurant and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rave Restaurant Group and First Watch Restaurant, you can compare the effects of market volatilities on Rave Restaurant 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 Rave Restaurant with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and First Watch.
Diversification Opportunities for Rave Restaurant and First Watch
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rave and First is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group 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 Rave Restaurant 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 Rave Restaurant Group 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 Rave Restaurant i.e., Rave Restaurant and First Watch go up and down completely randomly.
Pair Corralation between Rave Restaurant and First Watch
Given the investment horizon of 90 days Rave Restaurant is expected to generate 3.09 times less return on investment than First Watch. But when comparing it to its historical volatility, Rave Restaurant Group is 1.38 times less risky than First Watch. It trades about 0.07 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,700 in First Watch Restaurant on September 1, 2024 and sell it today you would earn a total of 209.00 from holding First Watch Restaurant or generate 12.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rave Restaurant Group vs. First Watch Restaurant
Performance |
| Timeline |
| Rave Restaurant Group |
| First Watch Restaurant |
Rave Restaurant and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rave Restaurant and First Watch
The main advantage of trading using opposite Rave Restaurant and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant 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.| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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