Correlation Between Boston Beer and Sweetgreen

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

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

Diversification Opportunities for Boston Beer and Sweetgreen

0.54

Correlation Coefficient

Boston Beer  Sweetgreen

Very weak diversification

The 3 months correlation between Boston and Sweetgreen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Sweetgreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweetgreen and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Sweetgreen go up and down completely randomly.

Pair Corralation between Boston Beer and Sweetgreen

Considering the 90-day investment horizon Boston Beer is expected to generate 266.0 times less return on investment than Sweetgreen. But when comparing it to its historical volatility, Boston Beer is 2.01 times less risky than Sweetgreen. It trades about 0.0 of its potential returns per unit of risk. Sweetgreen is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,084  in Sweetgreen on September 2, 2024 and sell it today you would earn a total of  3,014  from holding Sweetgreen or generate 278.04% return on investment over 90 days.

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

Boston Beer  vs.  Sweetgreen

Boston Beer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Sweetgreen

Risk-Adjusted Performance

12 of 100

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.

Pair Trading with Boston Beer and Sweetgreen

The main advantage of trading using opposite Boston Beer and Sweetgreen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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 Boston Beer 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.