Correlation Between First Watch and SCHMID Group

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

Diversification Opportunities for First Watch and SCHMID Group

-0.57

Correlation Coefficient

First Watch  SCHMID Group

Excellent diversification

The 3 months correlation between First and SCHMID is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and SCHMID Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCHMID Group NV 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 SCHMID Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCHMID Group NV has no effect on the direction of First Watch i.e., First Watch and SCHMID Group go up and down completely randomly.

Pair Corralation between First Watch and SCHMID Group

Given the investment horizon of 90 days First Watch is expected to generate 1.74 times less return on investment than SCHMID Group. But when comparing it to its historical volatility, First Watch Restaurant is 3.83 times less risky than SCHMID Group. It trades about 0.11 of its potential returns per unit of risk. SCHMID Group NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  30.00  in SCHMID Group NV on September 7, 2024 and sell it today you would lose (2.00) from holding SCHMID Group NV or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.5%
Values	Daily Returns

First Watch Restaurant  vs.  SCHMID Group NV

First Watch Restaurant

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 8 (%) 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.

SCHMID Group NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCHMID Group NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, SCHMID Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Watch and SCHMID Group

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

The idea behind First Watch Restaurant and SCHMID Group NV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.