Correlation Between Rite Aid and Sprouts Farmers

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

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

Diversification Opportunities for Rite Aid and Sprouts Farmers

-0.88

Correlation Coefficient

Rite Aid  Sprouts Farmers

Pay attention - limited upside

The 3 months correlation between Rite and Sprouts is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Rite Aid 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 Rite Aid 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 Rite Aid 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 Rite Aid i.e., Rite Aid and Sprouts Farmers go up and down completely randomly.

Pair Corralation between Rite Aid and Sprouts Farmers

If you would invest  6,391  in Sprouts Farmers Market on January 26, 2024 and sell it today you would earn a total of  168.00  from holding Sprouts Farmers Market or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Rite Aid  vs.  Sprouts Farmers Market

Rite Aid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rite Aid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rite Aid is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sprouts Farmers Market

Risk-Adjusted Performance

19 of 100

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 fragile 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 Rite Aid and Sprouts Farmers

The main advantage of trading using opposite Rite Aid and Sprouts Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rite Aid 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 Rite Aid 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.