Correlation Between National Vision and Grocery Outlet

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

By analyzing existing cross correlation between National Vision Holdings and Grocery Outlet Holding, you can compare the effects of market volatilities on National Vision and Grocery Outlet 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 National Vision with a short position of Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Vision and Grocery Outlet.

Diversification Opportunities for National Vision and Grocery Outlet

0.6

Correlation Coefficient

National Vision  Grocery Outlet

Poor diversification

The 3 months correlation between National and Grocery is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding and National Vision 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 National Vision Holdings are associated (or correlated) with Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of National Vision i.e., National Vision and Grocery Outlet go up and down completely randomly.

Pair Corralation between National Vision and Grocery Outlet

Considering the 90-day investment horizon National Vision Holdings is expected to under-perform the Grocery Outlet. In addition to that, National Vision is 1.43 times more volatile than Grocery Outlet Holding. It trades about -0.05 of its total potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.03 per unit of volatility. If you would invest  2,919  in Grocery Outlet Holding on September 20, 2024 and sell it today you would lose (1,259) from holding Grocery Outlet Holding or give up 43.13% of portfolio value over 90 days.

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

National Vision Holdings  vs.  Grocery Outlet Holding

National Vision Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, National Vision is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Grocery Outlet Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Grocery Outlet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Vision and Grocery Outlet

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

The idea behind National Vision Holdings and Grocery Outlet Holding 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.