Correlation Between Grocery Outlet and Ocado Group

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

Diversification Opportunities for Grocery Outlet and Ocado Group

0.74

Correlation Coefficient

Grocery Outlet  Ocado Group

Poor diversification

The 3 months correlation between Grocery and Ocado is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Ocado Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocado Group PLC 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 Ocado Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocado Group PLC has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Ocado Group go up and down completely randomly.

Pair Corralation between Grocery Outlet and Ocado Group

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Ocado Group. In addition to that, Grocery Outlet is 1.1 times more volatile than Ocado Group PLC. It trades about -0.01 of its total potential returns per unit of risk. Ocado Group PLC is currently generating about 0.04 per unit of volatility. If you would invest  361.00  in Ocado Group PLC on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Ocado Group PLC or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Grocery Outlet Holding  vs.  Ocado Group PLC

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 current stock price disarray, may contribute to short-term losses for the investors.

Ocado Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ocado Group PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ocado Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Grocery Outlet and Ocado Group

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

The idea behind Grocery Outlet Holding and Ocado Group PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.