Correlation Between Grocery Outlet and 594918BK9

Can any of the company-specific risk be diversified away by investing in both Grocery Outlet and 594918BK9 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 594918BK9 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 MICROSOFT P 42, you can compare the effects of market volatilities on Grocery Outlet and 594918BK9 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 594918BK9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and 594918BK9.

Diversification Opportunities for Grocery Outlet and 594918BK9

-0.42

Correlation Coefficient

Grocery Outlet  594918BK9

Very good diversification

The 3 months correlation between Grocery and 594918BK9 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and MICROSOFT P 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICROSOFT P 42 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 594918BK9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MICROSOFT P 42 has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and 594918BK9 go up and down completely randomly.

Pair Corralation between Grocery Outlet and 594918BK9

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the 594918BK9. In addition to that, Grocery Outlet is 4.99 times more volatile than MICROSOFT P 42. It trades about -0.04 of its total potential returns per unit of risk. MICROSOFT P 42 is currently generating about -0.02 per unit of volatility. If you would invest  9,589  in MICROSOFT P 42 on December 26, 2024 and sell it today you would lose (161.00) from holding MICROSOFT P 42 or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Grocery Outlet Holding  vs.  MICROSOFT P 42

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.

MICROSOFT P 42

Risk-Adjusted Performance

Very Weak

Over the last 90 days MICROSOFT P 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 594918BK9 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 594918BK9

The main advantage of trading using opposite Grocery Outlet and 594918BK9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet position performs unexpectedly, 594918BK9 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 594918BK9 will offset losses from the drop in 594918BK9's long position.

The idea behind Grocery Outlet Holding and MICROSOFT P 42 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.