Correlation Between Grocery Outlet and Origin Materials

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

Diversification Opportunities for Grocery Outlet and Origin Materials

0.54

Correlation Coefficient

Grocery Outlet  Origin Materials

Very weak diversification

The 3 months correlation between Grocery and Origin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Origin Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Origin Materials go up and down completely randomly.

Pair Corralation between Grocery Outlet and Origin Materials

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 1.09 times more return on investment than Origin Materials. However, Grocery Outlet is 1.09 times more volatile than Origin Materials. It trades about -0.02 of its potential returns per unit of risk. Origin Materials is currently generating about -0.13 per unit of risk. If you would invest  1,505  in Grocery Outlet Holding on December 28, 2024 and sell it today you would lose (208.00) from holding Grocery Outlet Holding or give up 13.82% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  Origin Materials

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.

Origin Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Grocery Outlet and Origin Materials

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

The idea behind Grocery Outlet Holding and Origin Materials 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 Global Correlations module to find global opportunities by holding instruments from different markets.