Correlation Between Sprouts Farmers and Sendas Distribuidora

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

Diversification Opportunities for Sprouts Farmers and Sendas Distribuidora

-0.69

Correlation Coefficient

Sprouts Farmers  Sendas Distribuidora

Excellent diversification

The 3 months correlation between Sprouts and Sendas is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sprouts Farmers Market and Sendas Distribuidora SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sendas Distribuidora 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 Sendas Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sendas Distribuidora has no effect on the direction of Sprouts Farmers i.e., Sprouts Farmers and Sendas Distribuidora go up and down completely randomly.

Pair Corralation between Sprouts Farmers and Sendas Distribuidora

Considering the 90-day investment horizon Sprouts Farmers Market is expected to generate 0.66 times more return on investment than Sendas Distribuidora. However, Sprouts Farmers Market is 1.52 times less risky than Sendas Distribuidora. It trades about 0.52 of its potential returns per unit of risk. Sendas Distribuidora SA is currently generating about -0.06 per unit of risk. If you would invest  11,884  in Sprouts Farmers Market on August 31, 2024 and sell it today you would earn a total of  3,313  from holding Sprouts Farmers Market or generate 27.88% return on investment over 90 days.

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

Sprouts Farmers Market  vs.  Sendas Distribuidora SA

Sprouts Farmers Market

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Sprouts Farmers displayed solid returns over the last few months and may actually be approaching a breakup point.

Sendas Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sendas Distribuidora SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Sprouts Farmers and Sendas Distribuidora

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

The idea behind Sprouts Farmers Market and Sendas Distribuidora 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.