Correlation Between Sweetgreen and Cincinnati Financial

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Can any of the company-specific risk be diversified away by investing in both Sweetgreen and Cincinnati Financial 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 Sweetgreen and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sweetgreen and Cincinnati Financial, you can compare the effects of market volatilities on Sweetgreen and Cincinnati Financial 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 Sweetgreen with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sweetgreen and Cincinnati Financial.

Diversification Opportunities for Sweetgreen and Cincinnati Financial

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sweetgreen and Cincinnati is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Sweetgreen 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 Sweetgreen are associated (or correlated) with Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of Sweetgreen i.e., Sweetgreen and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Sweetgreen and Cincinnati Financial

Allowing for the 90-day total investment horizon Sweetgreen is expected to generate 1.37 times less return on investment than Cincinnati Financial. In addition to that, Sweetgreen is 2.64 times more volatile than Cincinnati Financial. It trades about 0.1 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.35 per unit of volatility. If you would invest  14,065  in Cincinnati Financial on September 2, 2024 and sell it today you would earn a total of  1,918  from holding Cincinnati Financial or generate 13.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sweetgreen  vs.  Cincinnati Financial

 Performance 
       Timeline  
Sweetgreen 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sweetgreen are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Sweetgreen reported solid returns over the last few months and may actually be approaching a breakup point.
Cincinnati Financial 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cincinnati Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Sweetgreen and Cincinnati Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sweetgreen and Cincinnati Financial

The main advantage of trading using opposite Sweetgreen and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sweetgreen position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.
The idea behind Sweetgreen and Cincinnati Financial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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