Correlation Between Western Asset and Sweetgreen

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

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

Diversification Opportunities for Western Asset and Sweetgreen

-0.53

Correlation Coefficient

Western Asset  Sweetgreen

Excellent diversification

The 3 months correlation between Western and Sweetgreen is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Sweetgreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweetgreen and Western Asset 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 Western Asset Investment 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 Western Asset i.e., Western Asset and Sweetgreen go up and down completely randomly.

Pair Corralation between Western Asset and Sweetgreen

Considering the 90-day investment horizon Western Asset Investment is expected to under-perform the Sweetgreen. But the stock apears to be less risky and, when comparing its historical volatility, Western Asset Investment is 8.2 times less risky than Sweetgreen. The stock trades about -0.19 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Western Asset Investment  vs.  Sweetgreen

Western Asset Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 Western Asset and Sweetgreen

The main advantage of trading using opposite Western Asset and Sweetgreen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Investment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.