Correlation Between Sweetgreen and Rave Restaurant

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

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

Diversification Opportunities for Sweetgreen and Rave Restaurant

0.59

Correlation Coefficient

Sweetgreen  Rave Restaurant

Very weak diversification

The 3 months correlation between Sweetgreen and Rave is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Sweetgreen i.e., Sweetgreen and Rave Restaurant go up and down completely randomly.

Pair Corralation between Sweetgreen and Rave Restaurant

Allowing for the 90-day total investment horizon Sweetgreen is expected to under-perform the Rave Restaurant. In addition to that, Sweetgreen is 1.13 times more volatile than Rave Restaurant Group. It trades about -0.29 of its total potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.14 per unit of volatility. If you would invest  255.00  in Rave Restaurant Group on November 29, 2024 and sell it today you would earn a total of  27.00  from holding Rave Restaurant Group or generate 10.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Sweetgreen  vs.  Rave Restaurant Group

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.

Rave Restaurant Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rave Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rave Restaurant is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sweetgreen and Rave Restaurant

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

The idea behind Sweetgreen and Rave Restaurant Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.