Correlation Between SPROUTS FARMERS and LG Electronics
Can any of the company-specific risk be diversified away by investing in both SPROUTS FARMERS and LG Electronics 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 LG Electronics 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 LG Electronics, you can compare the effects of market volatilities on SPROUTS FARMERS and LG Electronics 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 LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPROUTS FARMERS and LG Electronics.
Diversification Opportunities for SPROUTS FARMERS and LG Electronics
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPROUTS and LGLG is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding SPROUTS FARMERS MKT and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of SPROUTS FARMERS i.e., SPROUTS FARMERS and LG Electronics go up and down completely randomly.
Pair Corralation between SPROUTS FARMERS and LG Electronics
Assuming the 90 days trading horizon SPROUTS FARMERS MKT is expected to generate 0.85 times more return on investment than LG Electronics. However, SPROUTS FARMERS MKT is 1.17 times less risky than LG Electronics. It trades about 0.22 of its potential returns per unit of risk. LG Electronics is currently generating about -0.05 per unit of risk. If you would invest 9,382 in SPROUTS FARMERS MKT on November 2, 2024 and sell it today you would earn a total of 5,478 from holding SPROUTS FARMERS MKT or generate 58.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.04% |
| Values | Daily Returns |
SPROUTS FARMERS MKT vs. LG Electronics
Performance |
| Timeline |
| SPROUTS FARMERS MKT |
| LG Electronics |
SPROUTS FARMERS and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPROUTS FARMERS and LG Electronics
The main advantage of trading using opposite SPROUTS FARMERS and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPROUTS FARMERS position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc |
| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Samsung Electronics Co | LG Electronics vs. Sony Group Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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