Correlation Between Grocery Outlet and United Guardian

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

Diversification Opportunities for Grocery Outlet and United Guardian

0.32

Correlation Coefficient

Grocery Outlet  United Guardian

Weak diversification

The 3 months correlation between Grocery and United is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and United Guardian go up and down completely randomly.

Pair Corralation between Grocery Outlet and United Guardian

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the United Guardian. In addition to that, Grocery Outlet is 2.55 times more volatile than United Guardian. It trades about -0.03 of its total potential returns per unit of risk. United Guardian is currently generating about -0.03 per unit of volatility. If you would invest  946.00  in United Guardian on December 27, 2024 and sell it today you would lose (50.00) from holding United Guardian or give up 5.29% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  United Guardian

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.

United Guardian

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, United Guardian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Grocery Outlet and United Guardian

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

The idea behind Grocery Outlet Holding and United Guardian 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.