Correlation Between Sprouts Farmers and Biotron

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

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

Diversification Opportunities for Sprouts Farmers and Biotron

-0.77

Correlation Coefficient

Sprouts Farmers  Biotron

Pay attention - limited upside

The 3 months correlation between Sprouts and Biotron is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sprouts Farmers Market and Biotron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotron Limited and Sprouts Farmers 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 Sprouts Farmers Market are associated (or correlated) with Biotron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotron Limited has no effect on the direction of Sprouts Farmers i.e., Sprouts Farmers and Biotron go up and down completely randomly.

Pair Corralation between Sprouts Farmers and Biotron

Considering the 90-day investment horizon Sprouts Farmers Market is expected to generate 0.96 times more return on investment than Biotron. However, Sprouts Farmers Market is 1.05 times less risky than Biotron. It trades about -0.01 of its potential returns per unit of risk. Biotron Limited is currently generating about -0.12 per unit of risk. If you would invest  7,609  in Sprouts Farmers Market on March 14, 2024 and sell it today you would lose (45.00) from holding Sprouts Farmers Market or give up 0.59% of portfolio value over 90 days.

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

Sprouts Farmers Market  vs.  Biotron Limited

Sprouts Farmers Market

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 11 (%) 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.

Biotron Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotron Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sprouts Farmers and Biotron

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

The idea behind Sprouts Farmers Market and Biotron Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.