Correlation Between First Watch and Good Times

Can any of the company-specific risk be diversified away by investing in both First Watch and Good Times 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 First Watch and Good Times into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Watch Restaurant and Good Times Restaurants, you can compare the effects of market volatilities on First Watch and Good Times 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 First Watch with a short position of Good Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Good Times.

Diversification Opportunities for First Watch and Good Times

-0.41

Correlation Coefficient

First Watch  Good Times

Very good diversification

The 3 months correlation between First and Good is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Good Times Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Times Restaurants and First Watch 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 First Watch Restaurant are associated (or correlated) with Good Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Times Restaurants has no effect on the direction of First Watch i.e., First Watch and Good Times go up and down completely randomly.

Pair Corralation between First Watch and Good Times

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 1.31 times more return on investment than Good Times. However, First Watch is 1.31 times more volatile than Good Times Restaurants. It trades about 0.15 of its potential returns per unit of risk. Good Times Restaurants is currently generating about -0.02 per unit of risk. If you would invest  1,500  in First Watch Restaurant on September 12, 2024 and sell it today you would earn a total of  463.00  from holding First Watch Restaurant or generate 30.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

First Watch Restaurant  vs.  Good Times Restaurants

First Watch Restaurant

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Good Times is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Watch and Good Times

The main advantage of trading using opposite First Watch and Good Times positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, Good Times 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 Good Times will offset losses from the drop in Good Times' long position.

The idea behind First Watch Restaurant and Good Times Restaurants pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..