Correlation Between First Watch and Paltalk

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

Diversification Opportunities for First Watch and Paltalk

-0.73

Correlation Coefficient

First Watch  Paltalk

Pay attention - limited upside

The 3 months correlation between First and Paltalk is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Paltalk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paltalk 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 Paltalk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paltalk has no effect on the direction of First Watch i.e., First Watch and Paltalk go up and down completely randomly.

Pair Corralation between First Watch and Paltalk

Given the investment horizon of 90 days First Watch Restaurant is expected to generate 0.87 times more return on investment than Paltalk. However, First Watch Restaurant is 1.15 times less risky than Paltalk. It trades about 0.11 of its potential returns per unit of risk. Paltalk is currently generating about 0.06 per unit of risk. If you would invest  1,721  in First Watch Restaurant on September 5, 2024 and sell it today you would earn a total of  143.00  from holding First Watch Restaurant or generate 8.31% return on investment over 90 days.

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

First Watch Restaurant  vs.  Paltalk

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 inconsistent basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

Paltalk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paltalk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with First Watch and Paltalk

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

The idea behind First Watch Restaurant and Paltalk 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.