Correlation Between Sprouts Farmers and SpartanNash

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

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

Diversification Opportunities for Sprouts Farmers and SpartanNash

-0.75

Correlation Coefficient

Sprouts Farmers  SpartanNash

Pay attention - limited upside

The 3 months correlation between Sprouts and SpartanNash is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sprouts Farmers Market and SpartanNash Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpartanNash and Sprouts Farmers 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 Sprouts Farmers Market are associated (or correlated) with SpartanNash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpartanNash has no effect on the direction of Sprouts Farmers i.e., Sprouts Farmers and SpartanNash go up and down completely randomly.

Pair Corralation between Sprouts Farmers and SpartanNash

Considering the 90-day investment horizon Sprouts Farmers Market is expected to generate 0.85 times more return on investment than SpartanNash. However, Sprouts Farmers Market is 1.18 times less risky than SpartanNash. It trades about 0.13 of its potential returns per unit of risk. SpartanNash Co is currently generating about -0.13 per unit of risk. If you would invest  11,097  in Sprouts Farmers Market on October 1, 2024 and sell it today you would earn a total of  1,753  from holding Sprouts Farmers Market or generate 15.8% return on investment over 90 days.

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

Sprouts Farmers Market  vs.  SpartanNash Co

Sprouts Farmers Market

Risk-Adjusted Performance

10 of 100

OK

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

SpartanNash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SpartanNash Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sprouts Farmers and SpartanNash

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

The idea behind Sprouts Farmers Market and SpartanNash Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.