Correlation Between Starbucks and First Watch
Can any of the company-specific risk be diversified away by investing in both Starbucks 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 Starbucks and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and First Watch Restaurant, you can compare the effects of market volatilities on Starbucks 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 Starbucks with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and First Watch.
Diversification Opportunities for Starbucks and First Watch
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Starbucks and First is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks 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 Starbucks 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 Starbucks 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 Starbucks i.e., Starbucks and First Watch go up and down completely randomly.
Pair Corralation between Starbucks and First Watch
Given the investment horizon of 90 days Starbucks is expected to generate 1.67 times less return on investment than First Watch. But when comparing it to its historical volatility, Starbucks is 2.63 times less risky than First Watch. It trades about 0.1 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,697 in First Watch Restaurant on August 28, 2024 and sell it today you would earn a total of 169.00 from holding First Watch Restaurant or generate 9.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. First Watch Restaurant
Performance |
| Timeline |
| Starbucks |
| First Watch Restaurant |
Starbucks and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and First Watch
The main advantage of trading using opposite Starbucks and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks 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.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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