Correlation Between Grocery Outlet and Connecticut Light

Can any of the company-specific risk be diversified away by investing in both Grocery Outlet and Connecticut Light 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 Connecticut Light 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 The Connecticut Light, you can compare the effects of market volatilities on Grocery Outlet and Connecticut Light 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 Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and Connecticut Light.

Diversification Opportunities for Grocery Outlet and Connecticut Light

0.09

Correlation Coefficient

Grocery Outlet  Connecticut Light

Significant diversification

The 3 months correlation between Grocery and Connecticut is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light 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 Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Connecticut Light go up and down completely randomly.

Pair Corralation between Grocery Outlet and Connecticut Light

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Connecticut Light. In addition to that, Grocery Outlet is 18.77 times more volatile than The Connecticut Light. It trades about -0.11 of its total potential returns per unit of risk. The Connecticut Light is currently generating about 0.07 per unit of volatility. If you would invest  4,077  in The Connecticut Light on December 11, 2024 and sell it today you would earn a total of  23.00  from holding The Connecticut Light or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Grocery Outlet Holding  vs.  The Connecticut Light

Grocery Outlet Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Connecticut Light

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Connecticut Light has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Connecticut Light is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Grocery Outlet and Connecticut Light

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

The idea behind Grocery Outlet Holding and The Connecticut Light 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.