Correlation Between Smart Share and Dutch Bros

Can any of the company-specific risk be diversified away by investing in both Smart Share and Dutch Bros 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 Smart Share and Dutch Bros into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smart Share Global and Dutch Bros, you can compare the effects of market volatilities on Smart Share and Dutch Bros 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 Smart Share with a short position of Dutch Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Share and Dutch Bros.

Diversification Opportunities for Smart Share and Dutch Bros

0.18

Correlation Coefficient

Smart Share  Dutch Bros

Average diversification

The 3 months correlation between Smart and Dutch is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Dutch Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dutch Bros and Smart Share 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 Smart Share Global are associated (or correlated) with Dutch Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dutch Bros has no effect on the direction of Smart Share i.e., Smart Share and Dutch Bros go up and down completely randomly.

Pair Corralation between Smart Share and Dutch Bros

Allowing for the 90-day total investment horizon Smart Share is expected to generate 2.62 times less return on investment than Dutch Bros. In addition to that, Smart Share is 1.25 times more volatile than Dutch Bros. It trades about 0.07 of its total potential returns per unit of risk. Dutch Bros is currently generating about 0.22 per unit of volatility. If you would invest  3,177  in Dutch Bros on September 5, 2024 and sell it today you would earn a total of  2,262  from holding Dutch Bros or generate 71.2% return on investment over 90 days.

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

Smart Share Global  vs.  Dutch Bros

Smart Share Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Dutch Bros

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dutch Bros are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Dutch Bros unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smart Share and Dutch Bros

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

The idea behind Smart Share Global and Dutch Bros 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.