Correlation Between Sally Beauty and Sprouts Farmers

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Sally Beauty 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 Sally Beauty and Sprouts Farmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sally Beauty Holdings and Sprouts Farmers Market, you can compare the effects of market volatilities on Sally Beauty 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 Sally Beauty with a short position of Sprouts Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sally Beauty and Sprouts Farmers.

Diversification Opportunities for Sally Beauty and Sprouts Farmers

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sally and Sprouts is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sally Beauty Holdings 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 Sally Beauty 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 Sally Beauty Holdings 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 Sally Beauty i.e., Sally Beauty and Sprouts Farmers go up and down completely randomly.

Pair Corralation between Sally Beauty and Sprouts Farmers

Considering the 90-day investment horizon Sally Beauty is expected to generate 6.11 times less return on investment than Sprouts Farmers. In addition to that, Sally Beauty is 2.57 times more volatile than Sprouts Farmers Market. It trades about 0.01 of its total potential returns per unit of risk. Sprouts Farmers Market is currently generating about 0.15 per unit of volatility. If you would invest  6,186  in Sprouts Farmers Market on December 30, 2023 and sell it today you would earn a total of  262.00  from holding Sprouts Farmers Market or generate 4.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sally Beauty Holdings  vs.  Sprouts Farmers Market

 Performance 
       Timeline  
Sally Beauty Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Sally Beauty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Sally Beauty is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Sprouts Farmers Market 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sprouts Farmers displayed solid returns over the last few months and may actually be approaching a breakup point.

Sally Beauty and Sprouts Farmers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sally Beauty and Sprouts Farmers

The main advantage of trading using opposite Sally Beauty and Sprouts Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sally Beauty 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 Sally Beauty Holdings 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.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

Other Complementary Tools

ETFs
Find actively traded Exchange Traded Funds (ETF) from around the world
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance