Correlation Between Krispy Kreme and Sweetgreen

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

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

Diversification Opportunities for Krispy Kreme and Sweetgreen

0.15

Correlation Coefficient

Krispy Kreme  Sweetgreen

Average diversification

The 3 months correlation between Krispy and Sweetgreen is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Sweetgreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweetgreen and Krispy Kreme 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 Krispy Kreme are associated (or correlated) with Sweetgreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweetgreen has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Sweetgreen go up and down completely randomly.

Pair Corralation between Krispy Kreme and Sweetgreen

Given the investment horizon of 90 days Krispy Kreme is expected to generate 1256.5 times less return on investment than Sweetgreen. But when comparing it to its historical volatility, Krispy Kreme is 1.22 times less risky than Sweetgreen. It trades about 0.0 of its potential returns per unit of risk. Sweetgreen is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,232  in Sweetgreen on February 16, 2024 and sell it today you would earn a total of  1,959  from holding Sweetgreen or generate 159.01% return on investment over 90 days.

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

Krispy Kreme  vs.  Sweetgreen

Krispy Kreme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krispy Kreme has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Krispy Kreme is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sweetgreen

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sweetgreen are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Sweetgreen reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krispy Kreme and Sweetgreen

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

The idea behind Krispy Kreme and Sweetgreen 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .