Correlation Between First Watch and Marfrig Global

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

Diversification Opportunities for First Watch and Marfrig Global

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between First and Marfrig is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of First Watch i.e., First Watch and Marfrig Global go up and down completely randomly.

Pair Corralation between First Watch and Marfrig Global

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 1.06 times more return on investment than Marfrig Global. However, First Watch is 1.06 times more volatile than Marfrig Global Foods. It trades about 0.14 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.12 per unit of risk. If you would invest  1,534  in First Watch Restaurant on September 17, 2024 and sell it today you would earn a total of  476.00  from holding First Watch Restaurant or generate 31.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

First Watch Restaurant  vs.  Marfrig Global Foods

 Performance 
       Timeline  
First Watch Restaurant 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
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 weak basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.
Marfrig Global Foods 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Marfrig Global showed solid returns over the last few months and may actually be approaching a breakup point.

First Watch and Marfrig Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Watch and Marfrig Global

The main advantage of trading using opposite First Watch and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, Marfrig Global 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 Marfrig Global will offset losses from the drop in Marfrig Global's long position.
The idea behind First Watch Restaurant and Marfrig Global Foods 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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