Correlation Between First Watch and Dicks Sporting

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

Diversification Opportunities for First Watch and Dicks Sporting

0.68

Correlation Coefficient

First Watch  Dicks Sporting

Poor diversification

The 3 months correlation between First and Dicks is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods 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 Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of First Watch i.e., First Watch and Dicks Sporting go up and down completely randomly.

Pair Corralation between First Watch and Dicks Sporting

Given the investment horizon of 90 days First Watch is expected to generate 7.74 times less return on investment than Dicks Sporting. In addition to that, First Watch is 1.07 times more volatile than Dicks Sporting Goods. It trades about 0.01 of its total potential returns per unit of risk. Dicks Sporting Goods is currently generating about 0.05 per unit of volatility. If you would invest  12,028  in Dicks Sporting Goods on February 8, 2025 and sell it today you would earn a total of  6,809  from holding Dicks Sporting Goods or generate 56.61% return on investment over 90 days.

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

First Watch Restaurant  vs.  Dicks Sporting Goods

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 fragile 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.

Dicks Sporting Goods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dicks Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in June 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 Dicks Sporting

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

The idea behind First Watch Restaurant and Dicks Sporting Goods 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.