Correlation Between Grocery Outlet and Almacenes Xito

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

Diversification Opportunities for Grocery Outlet and Almacenes Xito

-0.13

Correlation Coefficient

Grocery Outlet  Almacenes Xito

Good diversification

The 3 months correlation between Grocery and Almacenes is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Almacenes xito SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almacenes xito SA 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 Almacenes Xito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almacenes xito SA has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Almacenes Xito go up and down completely randomly.

Pair Corralation between Grocery Outlet and Almacenes Xito

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Almacenes Xito. In addition to that, Grocery Outlet is 2.2 times more volatile than Almacenes xito SA. It trades about -0.02 of its total potential returns per unit of risk. Almacenes xito SA is currently generating about 0.13 per unit of volatility. If you would invest  300.00  in Almacenes xito SA on December 29, 2024 and sell it today you would earn a total of  47.00  from holding Almacenes xito SA or generate 15.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.97%
Values	Daily Returns

Grocery Outlet Holding  vs.  Almacenes xito SA

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 very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Almacenes xito SA

Risk-Adjusted Performance

OK

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Almacenes Xito displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Almacenes Xito

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

The idea behind Grocery Outlet Holding and Almacenes xito SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.