Correlation Between Grocery Outlet and Global Ship

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

Diversification Opportunities for Grocery Outlet and Global Ship

0.09

Correlation Coefficient

Grocery Outlet  Global Ship

Significant diversification

The 3 months correlation between Grocery and Global is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease 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 Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Global Ship go up and down completely randomly.

Pair Corralation between Grocery Outlet and Global Ship

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 4.22 times more return on investment than Global Ship. However, Grocery Outlet is 4.22 times more volatile than Global Ship Lease. It trades about 0.08 of its potential returns per unit of risk. Global Ship Lease is currently generating about 0.06 per unit of risk. If you would invest  1,877  in Grocery Outlet Holding on September 12, 2024 and sell it today you would earn a total of  82.00  from holding Grocery Outlet Holding or generate 4.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Grocery Outlet Holding  vs.  Global Ship Lease

Grocery Outlet Holding

Risk-Adjusted Performance

6 of 100

OK

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.

Global Ship Lease

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Ship Lease are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grocery Outlet and Global Ship

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

The idea behind Grocery Outlet Holding and Global Ship Lease 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.