Correlation Between Sweetgreen and Despegar Corp

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

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

Diversification Opportunities for Sweetgreen and Despegar Corp

-0.51

Correlation Coefficient

Sweetgreen  Despegar Corp

Excellent diversification

The 3 months correlation between Sweetgreen and Despegar is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar Corp 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 Despegar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Despegar Corp has no effect on the direction of Sweetgreen i.e., Sweetgreen and Despegar Corp go up and down completely randomly.

Pair Corralation between Sweetgreen and Despegar Corp

Allowing for the 90-day total investment horizon Sweetgreen is expected to under-perform the Despegar Corp. But the stock apears to be less risky and, when comparing its historical volatility, Sweetgreen is 1.06 times less risky than Despegar Corp. The stock trades about -0.22 of its potential returns per unit of risk. The Despegar Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,789  in Despegar Corp on November 28, 2024 and sell it today you would earn a total of  135.00  from holding Despegar Corp or generate 7.55% return on investment over 90 days.

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

Sweetgreen  vs.  Despegar Corp

Sweetgreen

Risk-Adjusted Performance

Very Weak

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

Despegar Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sweetgreen and Despegar Corp

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

The idea behind Sweetgreen and Despegar Corp 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 CEOs Directory module to screen CEOs from public companies around the world.