Correlation Between Grocery Outlet and Legacy Education

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

Diversification Opportunities for Grocery Outlet and Legacy Education

0.27

Correlation Coefficient

Grocery Outlet  Legacy Education

Modest diversification

The 3 months correlation between Grocery and Legacy is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education 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 Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Legacy Education go up and down completely randomly.

Pair Corralation between Grocery Outlet and Legacy Education

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Legacy Education. But the stock apears to be less risky and, when comparing its historical volatility, Grocery Outlet Holding is 2.06 times less risky than Legacy Education. The stock trades about -0.06 of its potential returns per unit of risk. The Legacy Education is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  766.00  in Legacy Education on October 20, 2024 and sell it today you would earn a total of  107.00  from holding Legacy Education or generate 13.97% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Legacy Education

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

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.

Legacy Education

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Legacy Education

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

The idea behind Grocery Outlet Holding and Legacy Education 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.