Correlation Between Bloomin Brands and First Watch

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

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

Diversification Opportunities for Bloomin Brands and First Watch

0.79

Correlation Coefficient

Bloomin Brands  First Watch

Poor diversification

The 3 months correlation between Bloomin and First is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands 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 Bloomin Brands 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 Bloomin Brands 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 Bloomin Brands i.e., Bloomin Brands and First Watch go up and down completely randomly.

Pair Corralation between Bloomin Brands and First Watch

Given the investment horizon of 90 days Bloomin Brands is expected to under-perform the First Watch. In addition to that, Bloomin Brands is 1.2 times more volatile than First Watch Restaurant. It trades about -0.12 of its total potential returns per unit of risk. First Watch Restaurant is currently generating about -0.07 per unit of volatility. If you would invest  2,048  in First Watch Restaurant on February 11, 2025 and sell it today you would lose (471.00) from holding First Watch Restaurant or give up 23.0% of portfolio value over 90 days.

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

Bloomin Brands  vs.  First Watch Restaurant

Bloomin Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in June 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First Watch Restaurant

Risk-Adjusted Performance

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 June 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bloomin Brands and First Watch

The main advantage of trading using opposite Bloomin Brands and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bloomin Brands 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 Bloomin Brands 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.