Correlation Between First Watch and Oatly Group

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

Diversification Opportunities for First Watch and Oatly Group

-0.58

Correlation Coefficient

First Watch  Oatly Group

Excellent diversification

The 3 months correlation between First and Oatly is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Oatly Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oatly Group AB 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 Oatly Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oatly Group AB has no effect on the direction of First Watch i.e., First Watch and Oatly Group go up and down completely randomly.

Pair Corralation between First Watch and Oatly Group

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 0.62 times more return on investment than Oatly Group. However, First Watch Restaurant is 1.61 times less risky than Oatly Group. It trades about -0.04 of its potential returns per unit of risk. Oatly Group AB is currently generating about -0.11 per unit of risk. If you would invest  1,909  in First Watch Restaurant on September 30, 2024 and sell it today you would lose (39.00) from holding First Watch Restaurant or give up 2.04% of portfolio value over 90 days.

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

First Watch Restaurant  vs.  Oatly Group AB

First Watch Restaurant

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 7 (%) 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.

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with First Watch and Oatly Group

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

The idea behind First Watch Restaurant and Oatly Group AB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.