Correlation Between Sweetgreen and Transocean

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

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

Diversification Opportunities for Sweetgreen and Transocean

0.21

Correlation Coefficient

Sweetgreen  Transocean

Modest diversification

The 3 months correlation between Sweetgreen and Transocean is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Sweetgreen i.e., Sweetgreen and Transocean go up and down completely randomly.

Pair Corralation between Sweetgreen and Transocean

Allowing for the 90-day total investment horizon Sweetgreen is expected to generate 1.42 times more return on investment than Transocean. However, Sweetgreen is 1.42 times more volatile than Transocean. It trades about 0.01 of its potential returns per unit of risk. Transocean is currently generating about -0.12 per unit of risk. If you would invest  3,650  in Sweetgreen on September 24, 2024 and sell it today you would lose (140.00) from holding Sweetgreen or give up 3.84% of portfolio value over 90 days.

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

Sweetgreen  vs.  Transocean

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.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sweetgreen and Transocean

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

The idea behind Sweetgreen and Transocean 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.