Correlation Between Ocado Group and Grocery Outlet

Can any of the company-specific risk be diversified away by investing in both Ocado Group and Grocery Outlet 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 Ocado Group and Grocery Outlet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ocado Group plc and Grocery Outlet Holding, you can compare the effects of market volatilities on Ocado Group and Grocery Outlet 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 Ocado Group with a short position of Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocado Group and Grocery Outlet.

Diversification Opportunities for Ocado Group and Grocery Outlet

0.69

Correlation Coefficient

Ocado Group  Grocery Outlet

Poor diversification

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

Pair Corralation between Ocado Group and Grocery Outlet

Assuming the 90 days horizon Ocado Group plc is expected to generate 0.93 times more return on investment than Grocery Outlet. However, Ocado Group plc is 1.07 times less risky than Grocery Outlet. It trades about 0.04 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.01 per unit of risk. If you would invest  732.00  in Ocado Group plc on December 28, 2024 and sell it today you would earn a total of  29.00  from holding Ocado Group plc or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Ocado Group plc  vs.  Grocery Outlet Holding

Ocado Group plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ocado Group plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Ocado Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 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.

Pair Trading with Ocado Group and Grocery Outlet

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

The idea behind Ocado Group plc and Grocery Outlet Holding 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.