Correlation Between Sweetgreen and NORFOLK

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

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

Diversification Opportunities for Sweetgreen and NORFOLK

0.25

Correlation Coefficient

Sweetgreen  NORFOLK

Modest diversification

The 3 months correlation between Sweetgreen and NORFOLK is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P 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 NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Sweetgreen i.e., Sweetgreen and NORFOLK go up and down completely randomly.

Pair Corralation between Sweetgreen and NORFOLK

Allowing for the 90-day total investment horizon Sweetgreen is expected to under-perform the NORFOLK. In addition to that, Sweetgreen is 8.43 times more volatile than NORFOLK SOUTHN P. It trades about -0.17 of its total potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.23 per unit of volatility. If you would invest  9,772  in NORFOLK SOUTHN P on October 4, 2024 and sell it today you would lose (251.00) from holding NORFOLK SOUTHN P or give up 2.57% 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.  NORFOLK SOUTHN P

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sweetgreen and NORFOLK

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

The idea behind Sweetgreen and NORFOLK SOUTHN P 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.