Correlation Between First Watch and IAA

Can any of the company-specific risk be diversified away by investing in both First Watch and IAA 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 IAA 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 IAA Inc, you can compare the effects of market volatilities on First Watch and IAA 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 IAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and IAA.

Diversification Opportunities for First Watch and IAA

0.45

Correlation Coefficient

First Watch  IAA

Very weak diversification

The 3 months correlation between First and IAA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and IAA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAA Inc 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 IAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAA Inc has no effect on the direction of First Watch i.e., First Watch and IAA go up and down completely randomly.

Pair Corralation between First Watch and IAA

If you would invest  1,502  in First Watch Restaurant on October 1, 2024 and sell it today you would earn a total of  368.00  from holding First Watch Restaurant or generate 24.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

First Watch Restaurant  vs.  IAA Inc

First Watch Restaurant

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

IAA Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IAA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Watch and IAA

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

The idea behind First Watch Restaurant and IAA Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.