Correlation Between SPROUTS FARMERS and ADT
Can any of the company-specific risk be diversified away by investing in both SPROUTS FARMERS and ADT 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 ADT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPROUTS FARMERS MKT and ADT Inc, you can compare the effects of market volatilities on SPROUTS FARMERS and ADT 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 ADT. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPROUTS FARMERS and ADT.
Diversification Opportunities for SPROUTS FARMERS and ADT
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPROUTS and ADT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SPROUTS FARMERS MKT and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc 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 MKT are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of SPROUTS FARMERS i.e., SPROUTS FARMERS and ADT go up and down completely randomly.
Pair Corralation between SPROUTS FARMERS and ADT
Assuming the 90 days trading horizon SPROUTS FARMERS MKT is expected to generate 0.75 times more return on investment than ADT. However, SPROUTS FARMERS MKT is 1.34 times less risky than ADT. It trades about 0.17 of its potential returns per unit of risk. ADT Inc is currently generating about 0.01 per unit of risk. If you would invest 2,847 in SPROUTS FARMERS MKT on October 16, 2024 and sell it today you would earn a total of 10,753 from holding SPROUTS FARMERS MKT or generate 377.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
SPROUTS FARMERS MKT vs. ADT Inc
Performance |
| Timeline |
| SPROUTS FARMERS MKT |
| ADT Inc |
SPROUTS FARMERS and ADT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPROUTS FARMERS and ADT
The main advantage of trading using opposite SPROUTS FARMERS and ADT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPROUTS FARMERS position performs unexpectedly, ADT 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 ADT will offset losses from the drop in ADT's long position.| SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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