Correlation Between Sprouts Farmers and Alternative Energy

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

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

Diversification Opportunities for Sprouts Farmers and Alternative Energy

-0.32

Correlation Coefficient

Sprouts Farmers  Alternative Energy

Very good diversification

The 3 months correlation between Sprouts and Alternative is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sprouts Farmers Market and Alternative Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alternative Energy and Sprouts Farmers 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 Sprouts Farmers Market are associated (or correlated) with Alternative Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alternative Energy has no effect on the direction of Sprouts Farmers i.e., Sprouts Farmers and Alternative Energy go up and down completely randomly.

Pair Corralation between Sprouts Farmers and Alternative Energy

If you would invest  11,885  in Sprouts Farmers Market on August 24, 2024 and sell it today you would earn a total of  2,735  from holding Sprouts Farmers Market or generate 23.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Sprouts Farmers Market  vs.  Alternative Energy

Sprouts Farmers Market

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Sprouts Farmers displayed solid returns over the last few months and may actually be approaching a breakup point.

Alternative Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alternative Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Alternative Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprouts Farmers and Alternative Energy

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

The idea behind Sprouts Farmers Market and Alternative Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.