Correlation Between Krispy Kreme and Sprouts Farmers

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

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

Diversification Opportunities for Krispy Kreme and Sprouts Farmers

-0.13

Correlation Coefficient

Krispy Kreme  Sprouts Farmers

Good diversification

The 3 months correlation between Krispy and Sprouts is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Sprouts Farmers Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprouts Farmers Market and Krispy Kreme 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 Krispy Kreme are associated (or correlated) with Sprouts Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprouts Farmers Market has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Sprouts Farmers go up and down completely randomly.

Pair Corralation between Krispy Kreme and Sprouts Farmers

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the Sprouts Farmers. In addition to that, Krispy Kreme is 1.19 times more volatile than Sprouts Farmers Market. It trades about -0.01 of its total potential returns per unit of risk. Sprouts Farmers Market is currently generating about 0.42 per unit of volatility. If you would invest  9,969  in Sprouts Farmers Market on September 1, 2024 and sell it today you would earn a total of  5,479  from holding Sprouts Farmers Market or generate 54.96% return on investment over 90 days.

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

Krispy Kreme  vs.  Sprouts Farmers Market

Krispy Kreme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krispy Kreme has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Krispy Kreme is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sprouts Farmers Market

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Sprouts Farmers displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krispy Kreme and Sprouts Farmers

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

The idea behind Krispy Kreme and Sprouts Farmers Market 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.