Correlation Between Grocery Outlet and NextTrip

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

Diversification Opportunities for Grocery Outlet and NextTrip

0.7

Correlation Coefficient

Grocery Outlet  NextTrip

Poor diversification

The 3 months correlation between Grocery and NextTrip is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and NextTrip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextTrip 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 NextTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextTrip has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and NextTrip go up and down completely randomly.

Pair Corralation between Grocery Outlet and NextTrip

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the NextTrip. But the stock apears to be less risky and, when comparing its historical volatility, Grocery Outlet Holding is 1.49 times less risky than NextTrip. The stock trades about -0.01 of its potential returns per unit of risk. The NextTrip is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  632.00  in NextTrip on December 28, 2024 and sell it today you would lose (79.00) from holding NextTrip or give up 12.5% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  NextTrip

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.

NextTrip

Risk-Adjusted Performance

Weak

Over the last 90 days NextTrip has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, NextTrip is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Grocery Outlet and NextTrip

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

The idea behind Grocery Outlet Holding and NextTrip 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.