Correlation Between Village Super and Sprouts Farmers

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

By analyzing existing cross correlation between Village Super Market and Sprouts Farmers Market, you can compare the effects of market volatilities on Village Super and Sprouts Farmers 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 Village Super with a short position of Sprouts Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Village Super and Sprouts Farmers.

Diversification Opportunities for Village Super and Sprouts Farmers

0.44

Correlation Coefficient

Village Super  Sprouts Farmers

Very weak diversification

The 3 months correlation between Village and Sprouts is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Village Super Market and Sprouts Farmers Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprouts Farmers Market and Village Super 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 Village Super Market are associated (or correlated) with Sprouts Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprouts Farmers Market has no effect on the direction of Village Super i.e., Village Super and Sprouts Farmers go up and down completely randomly.

Pair Corralation between Village Super and Sprouts Farmers

Assuming the 90 days horizon Village Super is expected to generate 1.01 times less return on investment than Sprouts Farmers. But when comparing it to its historical volatility, Village Super Market is 1.58 times less risky than Sprouts Farmers. It trades about 0.15 of its potential returns per unit of risk. Sprouts Farmers Market is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,730  in Sprouts Farmers Market on December 29, 2024 and sell it today you would earn a total of  2,046  from holding Sprouts Farmers Market or generate 16.07% return on investment over 90 days.

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

Village Super Market  vs.  Sprouts Farmers Market

Village Super Market

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Village Super Market are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Village Super sustained solid returns over the last few months and may actually be approaching a breakup point.

Sprouts Farmers Market

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Sprouts Farmers displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Village Super and Sprouts Farmers

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

The idea behind Village Super Market and Sprouts Farmers Market 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.