Correlation Between Good Times and Sweetgreen

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

By analyzing existing cross correlation between Good Times Restaurants and Sweetgreen, you can compare the effects of market volatilities on Good Times and Sweetgreen 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 Good Times with a short position of Sweetgreen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Good Times and Sweetgreen.

Diversification Opportunities for Good Times and Sweetgreen

-0.36

Correlation Coefficient

Good Times  Sweetgreen

Very good diversification

The 3 months correlation between Good and Sweetgreen is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Sweetgreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweetgreen and Good Times 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 Good Times Restaurants are associated (or correlated) with Sweetgreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweetgreen has no effect on the direction of Good Times i.e., Good Times and Sweetgreen go up and down completely randomly.

Pair Corralation between Good Times and Sweetgreen

Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the Sweetgreen. But the stock apears to be less risky and, when comparing its historical volatility, Good Times Restaurants is 1.71 times less risky than Sweetgreen. The stock trades about -0.05 of its potential returns per unit of risk. The Sweetgreen is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,415  in Sweetgreen on September 15, 2024 and sell it today you would earn a total of  31.00  from holding Sweetgreen or generate 0.91% return on investment over 90 days.

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

Good Times Restaurants  vs.  Sweetgreen

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sweetgreen

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sweetgreen are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Sweetgreen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Good Times and Sweetgreen

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

The idea behind Good Times Restaurants and Sweetgreen 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.