Correlation Between Grocery Outlet and Iris Energy

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

Diversification Opportunities for Grocery Outlet and Iris Energy

0.56

Correlation Coefficient

Grocery Outlet  Iris Energy

Very weak diversification

The 3 months correlation between Grocery and Iris is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Iris Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Energy 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 Iris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Energy has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Iris Energy go up and down completely randomly.

Pair Corralation between Grocery Outlet and Iris Energy

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Iris Energy. But the stock apears to be less risky and, when comparing its historical volatility, Grocery Outlet Holding is 2.03 times less risky than Iris Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Iris Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  844.00  in Iris Energy on September 30, 2024 and sell it today you would earn a total of  227.00  from holding Iris Energy or generate 26.9% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Iris Energy

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Iris Energy

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Grocery Outlet and Iris Energy

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

The idea behind Grocery Outlet Holding and Iris Energy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.