Correlation Between U Power and First Watch
Can any of the company-specific risk be diversified away by investing in both U Power 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 U Power and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Power Limited and First Watch Restaurant, you can compare the effects of market volatilities on U Power 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 U Power with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Power and First Watch.
Diversification Opportunities for U Power and First Watch
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between UCAR and First is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding U Power 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 U Power 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 U Power 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 U Power i.e., U Power and First Watch go up and down completely randomly.
Pair Corralation between U Power and First Watch
Given the investment horizon of 90 days U Power Limited is expected to under-perform the First Watch. In addition to that, U Power is 1.09 times more volatile than First Watch Restaurant. It trades about -0.21 of its total potential returns per unit of risk. First Watch Restaurant is currently generating about 0.12 per unit of volatility. If you would invest 1,721 in First Watch Restaurant on September 4, 2024 and sell it today you would earn a total of 165.00 from holding First Watch Restaurant or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Power Limited vs. First Watch Restaurant
Performance |
| Timeline |
| U Power Limited |
| First Watch Restaurant |
U Power and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Power and First Watch
The main advantage of trading using opposite U Power and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Power 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.| U Power vs. Sonic Automotive | U Power vs. Lithia Motors | U Power vs. AutoNation | U Power vs. Penske Automotive Group |
| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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