Correlation Between Grocery Outlet and Digi International

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

Diversification Opportunities for Grocery Outlet and Digi International

0.69

Correlation Coefficient

Grocery Outlet  Digi International

Poor diversification

The 3 months correlation between Grocery and Digi is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Digi International go up and down completely randomly.

Pair Corralation between Grocery Outlet and Digi International

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Digi International. In addition to that, Grocery Outlet is 1.18 times more volatile than Digi International. It trades about -0.04 of its total potential returns per unit of risk. Digi International is currently generating about 0.06 per unit of volatility. If you would invest  2,534  in Digi International on September 24, 2024 and sell it today you would earn a total of  526.00  from holding Digi International or generate 20.76% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Digi International

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.

Digi International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Digi International

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

The idea behind Grocery Outlet Holding and Digi International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.