Correlation Between Grocery Outlet and Smurfit WestRock

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

Diversification Opportunities for Grocery Outlet and Smurfit WestRock

0.44

Correlation Coefficient

Grocery Outlet  Smurfit WestRock

Very weak diversification

The 3 months correlation between Grocery and Smurfit is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Smurfit WestRock plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit WestRock 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 Smurfit WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit WestRock plc has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Smurfit WestRock go up and down completely randomly.

Pair Corralation between Grocery Outlet and Smurfit WestRock

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Smurfit WestRock. In addition to that, Grocery Outlet is 1.91 times more volatile than Smurfit WestRock plc. It trades about -0.32 of its total potential returns per unit of risk. Smurfit WestRock plc is currently generating about -0.11 per unit of volatility. If you would invest  5,434  in Smurfit WestRock plc on October 8, 2024 and sell it today you would lose (204.00) from holding Smurfit WestRock plc or give up 3.75% 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.  Smurfit WestRock plc

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.

Smurfit WestRock plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Smurfit WestRock showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Smurfit WestRock

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

The idea behind Grocery Outlet Holding and Smurfit WestRock 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.