Correlation Between Sweetgreen and RBC Bearings

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

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

Diversification Opportunities for Sweetgreen and RBC Bearings

0.46

Correlation Coefficient

Sweetgreen  RBC Bearings

Very weak diversification

The 3 months correlation between Sweetgreen and RBC is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Sweetgreen 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 Sweetgreen are associated (or correlated) with RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Sweetgreen i.e., Sweetgreen and RBC Bearings go up and down completely randomly.

Pair Corralation between Sweetgreen and RBC Bearings

Allowing for the 90-day total investment horizon Sweetgreen is expected to under-perform the RBC Bearings. In addition to that, Sweetgreen is 2.45 times more volatile than RBC Bearings Incorporated. It trades about -0.01 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.06 per unit of volatility. If you would invest  29,545  in RBC Bearings Incorporated on September 20, 2024 and sell it today you would earn a total of  1,667  from holding RBC Bearings Incorporated or generate 5.64% return on investment over 90 days.

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

Sweetgreen  vs.  RBC Bearings Incorporated

Sweetgreen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sweetgreen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Sweetgreen is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

RBC Bearings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sweetgreen and RBC Bearings

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

The idea behind Sweetgreen and RBC Bearings Incorporated 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.