Correlation Between Reservoir Media and Grocery Outlet

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

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

Diversification Opportunities for Reservoir Media and Grocery Outlet

0.56

Correlation Coefficient

Reservoir Media  Grocery Outlet

Very weak diversification

The 3 months correlation between Reservoir and Grocery is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media 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 Reservoir Media 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 Reservoir Media 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 Reservoir Media i.e., Reservoir Media and Grocery Outlet go up and down completely randomly.

Pair Corralation between Reservoir Media and Grocery Outlet

Given the investment horizon of 90 days Reservoir Media is expected to generate 0.61 times more return on investment than Grocery Outlet. However, Reservoir Media is 1.64 times less risky than Grocery Outlet. It trades about 0.05 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  798.00  in Reservoir Media on October 8, 2024 and sell it today you would earn a total of  51.00  from holding Reservoir Media or generate 6.39% return on investment over 90 days.

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

Reservoir Media  vs.  Grocery Outlet Holding

Reservoir Media

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Reservoir Media may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

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 Reservoir Media and Grocery Outlet

The main advantage of trading using opposite Reservoir Media and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reservoir Media 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 Reservoir Media 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.