Correlation Between Grocery Outlet and Technology One

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

Diversification Opportunities for Grocery Outlet and Technology One

0.69

Correlation Coefficient

Grocery Outlet  Technology One

Poor diversification

The 3 months correlation between Grocery and Technology is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Technology One Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology One 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 Technology One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology One has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Technology One go up and down completely randomly.

Pair Corralation between Grocery Outlet and Technology One

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Technology One. But the stock apears to be less risky and, when comparing its historical volatility, Grocery Outlet Holding is 1.2 times less risky than Technology One. The stock trades about -0.05 of its potential returns per unit of risk. The Technology One Limited is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,633  in Technology One Limited on September 19, 2024 and sell it today you would earn a total of  337.00  from holding Technology One Limited or generate 20.64% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Technology One Limited

Grocery Outlet Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Grocery Outlet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Technology One

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Technology One Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Technology One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Technology One

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

The idea behind Grocery Outlet Holding and Technology One Limited 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.