Correlation Between Software Acquisition and First Watch

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

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

Diversification Opportunities for Software Acquisition and First Watch

0.44

Correlation Coefficient

Software Acquisition  First Watch

Very weak diversification

The 3 months correlation between Software and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Software Acquisition Group 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 Software Acquisition 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 Software Acquisition Group 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 Software Acquisition i.e., Software Acquisition and First Watch go up and down completely randomly.

Pair Corralation between Software Acquisition and First Watch

Assuming the 90 days horizon Software Acquisition Group is expected to generate 9.54 times more return on investment than First Watch. However, Software Acquisition is 9.54 times more volatile than First Watch Restaurant. It trades about 0.22 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.05 per unit of risk. If you would invest  1.00  in Software Acquisition Group on May 19, 2025 and sell it today you would earn a total of  1.75  from holding Software Acquisition Group or generate 175.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.38%
Values	Daily Returns

Software Acquisition Group  vs.  First Watch Restaurant

Software Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Software Acquisition Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Software Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

First Watch Restaurant

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, First Watch may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Software Acquisition and First Watch

The main advantage of trading using opposite Software Acquisition and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Acquisition 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 Software Acquisition Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.