Correlation Between Sweetgreen and Westrock Coffee

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

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

Diversification Opportunities for Sweetgreen and Westrock Coffee

0.65

Correlation Coefficient

Sweetgreen  Westrock Coffee

Poor diversification

The 3 months correlation between Sweetgreen and Westrock is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Sweetgreen i.e., Sweetgreen and Westrock Coffee go up and down completely randomly.

Pair Corralation between Sweetgreen and Westrock Coffee

Allowing for the 90-day total investment horizon Sweetgreen is expected to generate 1.1 times more return on investment than Westrock Coffee. However, Sweetgreen is 1.1 times more volatile than Westrock Coffee. It trades about -0.15 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.17 per unit of risk. If you would invest  3,774  in Sweetgreen on October 13, 2024 and sell it today you would lose (464.00) from holding Sweetgreen or give up 12.29% of portfolio value over 90 days.

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

Sweetgreen  vs.  Westrock Coffee

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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sweetgreen and Westrock Coffee

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

The idea behind Sweetgreen and Westrock Coffee 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.