Correlation Between Grocery Outlet and Reservoir Media

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

Diversification Opportunities for Grocery Outlet and Reservoir Media

0.56

Correlation Coefficient

Grocery Outlet  Reservoir Media

Very weak diversification

The 3 months correlation between Grocery and Reservoir is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Reservoir Media go up and down completely randomly.

Pair Corralation between Grocery Outlet and Reservoir Media

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Reservoir Media. In addition to that, Grocery Outlet is 1.13 times more volatile than Reservoir Media. It trades about -0.32 of its total potential returns per unit of risk. Reservoir Media is currently generating about -0.15 per unit of volatility. If you would invest  929.00  in Reservoir Media on October 8, 2024 and sell it today you would lose (80.00) from holding Reservoir Media or give up 8.61% 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.  Reservoir Media

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.

Reservoir Media

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Reservoir Media may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Grocery Outlet and Reservoir Media

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

The idea behind Grocery Outlet Holding and Reservoir Media 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.