Correlation Between Sweetgreen and Thor Industries

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

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

Diversification Opportunities for Sweetgreen and Thor Industries

0.7

Correlation Coefficient

Sweetgreen  Thor Industries

Poor diversification

The 3 months correlation between Sweetgreen and Thor is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Sweetgreen i.e., Sweetgreen and Thor Industries go up and down completely randomly.

Pair Corralation between Sweetgreen and Thor Industries

Allowing for the 90-day total investment horizon Sweetgreen is expected to generate 2.7 times more return on investment than Thor Industries. However, Sweetgreen is 2.7 times more volatile than Thor Industries. It trades about 0.07 of its potential returns per unit of risk. Thor Industries is currently generating about -0.01 per unit of risk. If you would invest  2,108  in Sweetgreen on October 12, 2024 and sell it today you would earn a total of  1,115  from holding Sweetgreen or generate 52.89% return on investment over 90 days.

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

Sweetgreen  vs.  Thor Industries

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 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sweetgreen and Thor Industries

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

The idea behind Sweetgreen and Thor Industries 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.