Correlation Between Wingstop and Sweetgreen

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

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

Diversification Opportunities for Wingstop and Sweetgreen

-0.11

Correlation Coefficient

Wingstop  Sweetgreen

Good diversification

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

Pair Corralation between Wingstop and Sweetgreen

Given the investment horizon of 90 days Wingstop is expected to generate 0.52 times more return on investment than Sweetgreen. However, Wingstop is 1.91 times less risky than Sweetgreen. It trades about -0.29 of its potential returns per unit of risk. Sweetgreen is currently generating about -0.25 per unit of risk. 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

Wingstop  vs.  Sweetgreen

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.

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.

Pair Trading with Wingstop and Sweetgreen

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

The idea behind Wingstop and Sweetgreen 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.