Correlation Between Grocery Outlet and PACIFIC

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

Diversification Opportunities for Grocery Outlet and PACIFIC

0.12

Correlation Coefficient

Grocery Outlet  PACIFIC

Average diversification

The 3 months correlation between Grocery and PACIFIC is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and PACIFIC GAS ELECTRIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC GAS ELECTRIC 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 PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC GAS ELECTRIC has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and PACIFIC go up and down completely randomly.

Pair Corralation between Grocery Outlet and PACIFIC

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 16.35 times more return on investment than PACIFIC. However, Grocery Outlet is 16.35 times more volatile than PACIFIC GAS ELECTRIC. It trades about 0.02 of its potential returns per unit of risk. PACIFIC GAS ELECTRIC is currently generating about 0.08 per unit of risk. If you would invest  1,618  in Grocery Outlet Holding on October 5, 2024 and sell it today you would earn a total of  12.00  from holding Grocery Outlet Holding or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Grocery Outlet Holding  vs.  PACIFIC GAS ELECTRIC

Grocery Outlet Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

PACIFIC GAS ELECTRIC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PACIFIC GAS ELECTRIC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, PACIFIC 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 PACIFIC

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

The idea behind Grocery Outlet Holding and PACIFIC GAS ELECTRIC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.