Correlation Between Brinker International and First Watch

Can any of the company-specific risk be diversified away by investing in both Brinker International and First Watch 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 Brinker International and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brinker International and First Watch Restaurant, you can compare the effects of market volatilities on Brinker International and First Watch 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 Brinker International with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and First Watch.

Diversification Opportunities for Brinker International and First Watch

-0.81

Correlation Coefficient

Brinker International  First Watch

Pay attention - limited upside

The 3 months correlation between Brinker and First is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant and Brinker International 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 Brinker International are associated (or correlated) with First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of Brinker International i.e., Brinker International and First Watch go up and down completely randomly.

Pair Corralation between Brinker International and First Watch

Considering the 90-day investment horizon Brinker International is expected to generate 0.88 times more return on investment than First Watch. However, Brinker International is 1.13 times less risky than First Watch. It trades about 0.44 of its potential returns per unit of risk. First Watch Restaurant is currently generating about -0.35 per unit of risk. If you would invest  5,852  in Brinker International on March 10, 2024 and sell it today you would earn a total of  1,044  from holding Brinker International or generate 17.84% return on investment over 90 days.

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

Brinker International  vs.  First Watch Restaurant

Brinker International

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Watch Restaurant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Watch Restaurant has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Brinker International and First Watch

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

The idea behind Brinker International and First Watch Restaurant 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.