Correlation Between Grocery Outlet and Acco Brands

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

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

Diversification Opportunities for Grocery Outlet and Acco Brands

0.58

Correlation Coefficient

Grocery Outlet  Acco Brands

Very weak diversification

The 3 months correlation between Grocery and Acco is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands and Grocery Outlet 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 Grocery Outlet Holding are associated (or correlated) with Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Acco Brands go up and down completely randomly.

Pair Corralation between Grocery Outlet and Acco Brands

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 1.7 times more return on investment than Acco Brands. However, Grocery Outlet is 1.7 times more volatile than Acco Brands. It trades about 0.09 of its potential returns per unit of risk. Acco Brands is currently generating about 0.08 per unit of risk. If you would invest  1,792  in Grocery Outlet Holding on August 31, 2024 and sell it today you would earn a total of  333.00  from holding Grocery Outlet Holding or generate 18.58% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Acco Brands

Grocery Outlet Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Grocery Outlet displayed solid returns over the last few months and may actually be approaching a breakup point.

Acco Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Acco Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Acco Brands may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Grocery Outlet and Acco Brands

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

The idea behind Grocery Outlet Holding and Acco Brands 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.