Correlation Between Grocery Outlet and Tarsus Pharmaceuticals

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

Diversification Opportunities for Grocery Outlet and Tarsus Pharmaceuticals

0.07

Correlation Coefficient

Grocery Outlet  Tarsus Pharmaceuticals

Significant diversification

The 3 months correlation between Grocery and Tarsus is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Tarsus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarsus Pharmaceuticals 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 Tarsus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarsus Pharmaceuticals has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Tarsus Pharmaceuticals go up and down completely randomly.

Pair Corralation between Grocery Outlet and Tarsus Pharmaceuticals

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Tarsus Pharmaceuticals. In addition to that, Grocery Outlet is 1.28 times more volatile than Tarsus Pharmaceuticals. It trades about -0.02 of its total potential returns per unit of risk. Tarsus Pharmaceuticals is currently generating about 0.13 per unit of volatility. If you would invest  3,967  in Tarsus Pharmaceuticals on October 26, 2024 and sell it today you would earn a total of  945.00  from holding Tarsus Pharmaceuticals or generate 23.82% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Tarsus Pharmaceuticals

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.

Tarsus Pharmaceuticals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tarsus Pharmaceuticals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Tarsus Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Tarsus Pharmaceuticals

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

The idea behind Grocery Outlet Holding and Tarsus Pharmaceuticals 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.

Check out your portfolio center.

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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .