Correlation Between Smartsheet and Sprout Social

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

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

Diversification Opportunities for Smartsheet and Sprout Social

-0.44

Correlation Coefficient

Smartsheet  Sprout Social

Very good diversification

The 3 months correlation between Smartsheet and Sprout is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Smartsheet and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social and Smartsheet 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 Smartsheet are associated (or correlated) with Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of Smartsheet i.e., Smartsheet and Sprout Social go up and down completely randomly.

Pair Corralation between Smartsheet and Sprout Social

Given the investment horizon of 90 days Smartsheet is expected to generate 0.77 times more return on investment than Sprout Social. However, Smartsheet is 1.3 times less risky than Sprout Social. It trades about 0.04 of its potential returns per unit of risk. Sprout Social is currently generating about -0.02 per unit of risk. If you would invest  3,436  in Smartsheet on June 21, 2024 and sell it today you would earn a total of  1,645  from holding Smartsheet or generate 47.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Smartsheet  vs.  Sprout Social

Smartsheet

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smartsheet are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Smartsheet reported solid returns over the last few months and may actually be approaching a breakup point.

Sprout Social

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprout Social has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Smartsheet and Sprout Social

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

The idea behind Smartsheet and Sprout Social 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..