Correlation Between First Watch and TIM Participacoes

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

Diversification Opportunities for First Watch and TIM Participacoes

-0.46

Correlation Coefficient

First Watch  TIM Participacoes

Very good diversification

The 3 months correlation between First and TIM is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes 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 TIM Participacoes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIM Participacoes has no effect on the direction of First Watch i.e., First Watch and TIM Participacoes go up and down completely randomly.

Pair Corralation between First Watch and TIM Participacoes

Given the investment horizon of 90 days First Watch Restaurant is expected to under-perform the TIM Participacoes. In addition to that, First Watch is 1.89 times more volatile than TIM Participacoes SA. It trades about -0.06 of its total potential returns per unit of risk. TIM Participacoes SA is currently generating about 0.16 per unit of volatility. If you would invest  1,521  in TIM Participacoes SA on April 20, 2025 and sell it today you would earn a total of  303.00  from holding TIM Participacoes SA or generate 19.92% return on investment over 90 days.

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

First Watch Restaurant  vs.  TIM Participacoes SA

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TIM Participacoes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TIM Participacoes SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, TIM Participacoes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Watch and TIM Participacoes

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

The idea behind First Watch Restaurant and TIM Participacoes SA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.