Correlation Between National Vision and Grocery Outlet

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

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

Diversification Opportunities for National Vision and Grocery Outlet

0.54

Correlation Coefficient

National Vision  Grocery Outlet

Very weak diversification

The 3 months correlation between National and Grocery is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings 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 National Vision 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 National Vision Holdings 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 National Vision i.e., National Vision and Grocery Outlet go up and down completely randomly.

Pair Corralation between National Vision and Grocery Outlet

Considering the 90-day investment horizon National Vision is expected to generate 1.55 times less return on investment than Grocery Outlet. But when comparing it to its historical volatility, National Vision Holdings is 1.48 times less risky than Grocery Outlet. It trades about 0.08 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Grocery Outlet Holding on September 5, 2024 and sell it today you would earn a total of  280.00  from holding Grocery Outlet Holding or generate 16.47% return on investment over 90 days.

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

National Vision Holdings  vs.  Grocery Outlet Holding

National Vision Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

Grocery Outlet Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Grocery Outlet displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Vision and Grocery Outlet

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