Correlation Between Grocery Outlet and NI Holdings

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

Diversification Opportunities for Grocery Outlet and NI Holdings

0.62

Correlation Coefficient

Grocery Outlet  NI Holdings

Poor diversification

The 3 months correlation between Grocery and NODK is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings 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 NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and NI Holdings go up and down completely randomly.

Pair Corralation between Grocery Outlet and NI Holdings

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 2.74 times more return on investment than NI Holdings. However, Grocery Outlet is 2.74 times more volatile than NI Holdings. It trades about 0.07 of its potential returns per unit of risk. NI Holdings is currently generating about 0.12 per unit of risk. If you would invest  1,686  in Grocery Outlet Holding on September 15, 2024 and sell it today you would earn a total of  225.00  from holding Grocery Outlet Holding or generate 13.35% 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.  NI Holdings

Grocery Outlet Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Grocery Outlet displayed solid returns over the last few months and may actually be approaching a breakup point.

NI Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Grocery Outlet and NI Holdings

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

The idea behind Grocery Outlet Holding and NI Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.