Correlation Between Grocery Outlet and Dingdong ADR
Can any of the company-specific risk be diversified away by investing in both Grocery Outlet and Dingdong ADR 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 Dingdong ADR 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 Dingdong ADR, you can compare the effects of market volatilities on Grocery Outlet and Dingdong ADR 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 Dingdong ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and Dingdong ADR.
Diversification Opportunities for Grocery Outlet and Dingdong ADR
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Grocery and Dingdong is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR 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 Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Dingdong ADR go up and down completely randomly.
Pair Corralation between Grocery Outlet and Dingdong ADR
Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Dingdong ADR. But the stock apears to be less risky and, when comparing its historical volatility, Grocery Outlet Holding is 2.22 times less risky than Dingdong ADR. The stock trades about -0.03 of its potential returns per unit of risk. The Dingdong ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 488.00 in Dingdong ADR on September 11, 2024 and sell it today you would lose (20.00) from holding Dingdong ADR or give up 4.1% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Grocery Outlet Holding vs. Dingdong ADR
Performance |
Timeline |
Grocery Outlet Holding |
Dingdong ADR |
Grocery Outlet and Dingdong ADR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Grocery Outlet and Dingdong ADR
The main advantage of trading using opposite Grocery Outlet and Dingdong ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet position performs unexpectedly, Dingdong ADR 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 Dingdong ADR will offset losses from the drop in Dingdong ADR's long position.Grocery Outlet vs. Natural Grocers by | Grocery Outlet vs. Village Super Market | Grocery Outlet vs. Ingles Markets Incorporated | Grocery Outlet vs. Ocado Group plc |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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