Correlation Between US Bancorp and First Watch

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Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and First Watch Restaurant, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and First Watch.

Diversification Opportunities for US Bancorp and First Watch

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between USB and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp 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 US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and First Watch go up and down completely randomly.

Pair Corralation between US Bancorp and First Watch

Considering the 90-day investment horizon US Bancorp is expected to generate 0.37 times more return on investment than First Watch. However, US Bancorp is 2.67 times less risky than First Watch. It trades about 0.19 of its potential returns per unit of risk. First Watch Restaurant is currently generating about -0.04 per unit of risk. If you would invest  3,961  in US Bancorp on April 24, 2025 and sell it today you would earn a total of  655.00  from holding US Bancorp or generate 16.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

US Bancorp  vs.  First Watch Restaurant

 Performance 
       Timeline  
US Bancorp 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, US Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.
First Watch Restaurant 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days First Watch Restaurant has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

US Bancorp and First Watch Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with US Bancorp and First Watch

The main advantage of trading using opposite US Bancorp and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US Bancorp 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.
Check out your portfolio center.
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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