Correlation Between Grocery Outlet and Alchemy Investments

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

Diversification Opportunities for Grocery Outlet and Alchemy Investments

0.22

Correlation Coefficient

Grocery Outlet  Alchemy Investments

Modest diversification

The 3 months correlation between Grocery and Alchemy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Alchemy Investments Acquisitio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchemy Investments 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 Alchemy Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alchemy Investments has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Alchemy Investments go up and down completely randomly.

Pair Corralation between Grocery Outlet and Alchemy Investments

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 2.27 times more return on investment than Alchemy Investments. However, Grocery Outlet is 2.27 times more volatile than Alchemy Investments Acquisition. It trades about 0.07 of its potential returns per unit of risk. Alchemy Investments Acquisition is currently generating about 0.01 per unit of risk. If you would invest  1,686  in Grocery Outlet Holding on September 16, 2024 and sell it today you would earn a total of  225.00  from holding Grocery Outlet Holding or generate 13.35% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Alchemy Investments Acquisitio

Grocery Outlet Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Grocery Outlet displayed solid returns over the last few months and may actually be approaching a breakup point.

Alchemy Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alchemy Investments Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alchemy Investments is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Grocery Outlet and Alchemy Investments

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

The idea behind Grocery Outlet Holding and Alchemy Investments Acquisition 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.