Correlation Between Sweetgreen and Wingstop

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

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

Diversification Opportunities for Sweetgreen and Wingstop

-0.11

Correlation Coefficient

Sweetgreen  Wingstop

Good diversification

The 3 months correlation between Sweetgreen and Wingstop is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Sweetgreen i.e., Sweetgreen and Wingstop go up and down completely randomly.

Pair Corralation between Sweetgreen and Wingstop

Allowing for the 90-day total investment horizon Sweetgreen is expected to under-perform the Wingstop. In addition to that, Sweetgreen is 1.91 times more volatile than Wingstop. It trades about -0.25 of its total potential returns per unit of risk. Wingstop is currently generating about -0.29 per unit of volatility. If you would invest  33,879  in Wingstop on September 27, 2024 and sell it today you would lose (4,704) from holding Wingstop or give up 13.88% of portfolio value over 90 days.

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

Sweetgreen  vs.  Wingstop

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

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sweetgreen and Wingstop

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

The idea behind Sweetgreen and Wingstop 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.