Correlation Between Grocery Outlet and Marfrig Global

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

Diversification Opportunities for Grocery Outlet and Marfrig Global

0.68

Correlation Coefficient

Grocery Outlet  Marfrig Global

Poor diversification

The 3 months correlation between Grocery and Marfrig is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Marfrig Global go up and down completely randomly.

Pair Corralation between Grocery Outlet and Marfrig Global

Allowing for the 90-day total investment horizon Grocery Outlet is expected to generate 2.12 times less return on investment than Marfrig Global. In addition to that, Grocery Outlet is 1.09 times more volatile than Marfrig Global Foods. It trades about 0.03 of its total potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.08 per unit of volatility. If you would invest  227.00  in Marfrig Global Foods on October 10, 2024 and sell it today you would earn a total of  34.00  from holding Marfrig Global Foods or generate 14.98% 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.  Marfrig Global Foods

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 unsteady basic indicators, Grocery Outlet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Marfrig Global Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Marfrig Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Marfrig Global

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

The idea behind Grocery Outlet Holding and Marfrig Global Foods 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.