Correlation Between Newell and Grocery Outlet

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

By analyzing existing cross correlation between Newell Brands 5375 and Grocery Outlet Holding, you can compare the effects of market volatilities on Newell 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 Newell with a short position of Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newell and Grocery Outlet.

Diversification Opportunities for Newell and Grocery Outlet

0.48

Correlation Coefficient

Newell  Grocery Outlet

Very weak diversification

The 3 months correlation between Newell and Grocery is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Newell Brands 5375 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 Newell 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 Newell Brands 5375 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 Newell i.e., Newell and Grocery Outlet go up and down completely randomly.

Pair Corralation between Newell and Grocery Outlet

Assuming the 90 days trading horizon Newell Brands 5375 is expected to under-perform the Grocery Outlet. In addition to that, Newell is 1.39 times more volatile than Grocery Outlet Holding. It trades about -0.25 of its total potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.24 per unit of volatility. If you would invest  1,935  in Grocery Outlet Holding on October 9, 2024 and sell it today you would lose (304.00) from holding Grocery Outlet Holding or give up 15.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Newell Brands 5375  vs.  Grocery Outlet Holding

Newell Brands 5375

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newell Brands 5375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Newell Brands 5375 investors.

Grocery Outlet Holding

Risk-Adjusted Performance

1 of 100

Very 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.

Pair Trading with Newell and Grocery Outlet

The main advantage of trading using opposite Newell and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newell 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 Newell Brands 5375 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .