Correlation Between Grocery Outlet and Seven I

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

Diversification Opportunities for Grocery Outlet and Seven I

0.88

Correlation Coefficient

Grocery Outlet  Seven I

Very poor diversification

The 3 months correlation between Grocery and Seven is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Seven i Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven i Holdings 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 Seven I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven i Holdings has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Seven I go up and down completely randomly.

Pair Corralation between Grocery Outlet and Seven I

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Seven I. In addition to that, Grocery Outlet is 2.45 times more volatile than Seven i Holdings. It trades about -0.03 of its total potential returns per unit of risk. Seven i Holdings is currently generating about -0.04 per unit of volatility. If you would invest  1,565  in Seven i Holdings on December 27, 2024 and sell it today you would lose (94.00) from holding Seven i Holdings or give up 6.01% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  Seven i Holdings

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Seven i Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seven i Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Seven I is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grocery Outlet and Seven I

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

The idea behind Grocery Outlet Holding and Seven i Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.