Correlation Between SPROUTS FARMERS and British American
Can any of the company-specific risk be diversified away by investing in both SPROUTS FARMERS and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on SPROUTS FARMERS and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPROUTS FARMERS and British American.
Diversification Opportunities for SPROUTS FARMERS and British American
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPROUTS and British is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SPROUTS FARMERS MKT and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of SPROUTS FARMERS i.e., SPROUTS FARMERS and British American go up and down completely randomly.
Pair Corralation between SPROUTS FARMERS and British American
Assuming the 90 days trading horizon SPROUTS FARMERS MKT is expected to generate 1.86 times more return on investment than British American. However, SPROUTS FARMERS is 1.86 times more volatile than British American Tobacco. It trades about 0.18 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.1 per unit of risk. If you would invest 12,925 in SPROUTS FARMERS MKT on October 20, 2024 and sell it today you would earn a total of 685.00 from holding SPROUTS FARMERS MKT or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
SPROUTS FARMERS MKT vs. British American Tobacco
Performance |
| Timeline |
| SPROUTS FARMERS MKT |
| British American Tobacco |
SPROUTS FARMERS and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPROUTS FARMERS and British American
The main advantage of trading using opposite SPROUTS FARMERS and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPROUTS FARMERS position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc |
| British American vs. GigaMedia | British American vs. PENN NATL GAMING | British American vs. Tencent Music Entertainment | British American vs. Urban Outfitters |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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