Correlation Between Grocery Outlet and New Providence

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

Diversification Opportunities for Grocery Outlet and New Providence

0.13

Correlation Coefficient

Grocery Outlet  New Providence

Average diversification

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

Pair Corralation between Grocery Outlet and New Providence

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the New Providence. In addition to that, Grocery Outlet is 1.07 times more volatile than New Providence Acquisition. It trades about -0.05 of its total potential returns per unit of risk. New Providence Acquisition is currently generating about 0.03 per unit of volatility. If you would invest  1,019  in New Providence Acquisition on October 25, 2024 and sell it today you would earn a total of  201.00  from holding New Providence Acquisition or generate 19.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.49%
Values	Daily Returns

Grocery Outlet Holding  vs.  New Providence Acquisition

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.

New Providence Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Providence Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Grocery Outlet and New Providence

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

The idea behind Grocery Outlet Holding and New Providence Acquisition 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.