Correlation Between Spectrum Brands and Sprouts Farmers

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

Diversification Opportunities for Spectrum Brands and Sprouts Farmers

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Spectrum and Sprouts is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands 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 Spectrum Brands 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 Spectrum Brands 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 Spectrum Brands i.e., Spectrum Brands and Sprouts Farmers go up and down completely randomly.

Pair Corralation between Spectrum Brands and Sprouts Farmers

Considering the 90-day investment horizon Spectrum Brands is expected to generate 3.3 times less return on investment than Sprouts Farmers. In addition to that, Spectrum Brands is 1.23 times more volatile than Sprouts Farmers Market. It trades about 0.03 of its total potential returns per unit of risk. Sprouts Farmers Market is currently generating about 0.1 per unit of volatility. If you would invest  2,709  in Sprouts Farmers Market on December 29, 2023 and sell it today you would earn a total of  3,695  from holding Sprouts Farmers Market or generate 136.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Spectrum Brands Holdings  vs.  Sprouts Farmers Market

 Performance 
       Timeline  
Spectrum Brands Holdings 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Brands Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Spectrum Brands may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Sprouts Farmers Market 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 19 (%) 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.

Spectrum Brands and Sprouts Farmers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spectrum Brands and Sprouts Farmers

The main advantage of trading using opposite Spectrum Brands and Sprouts Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Brands 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 Spectrum Brands 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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