Correlation Between Grocery Outlet and UNITED

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

Diversification Opportunities for Grocery Outlet and UNITED

-0.25

Correlation Coefficient

Grocery Outlet  UNITED

Very good diversification

The 3 months correlation between Grocery and UNITED is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and UNITED TECHNOLOGIES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED TECHNOLOGIES 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 UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED TECHNOLOGIES has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and UNITED go up and down completely randomly.

Pair Corralation between Grocery Outlet and UNITED

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 7.08 times more return on investment than UNITED. However, Grocery Outlet is 7.08 times more volatile than UNITED TECHNOLOGIES P. It trades about 0.41 of its potential returns per unit of risk. UNITED TECHNOLOGIES P is currently generating about 0.06 per unit of risk. If you would invest  1,441  in Grocery Outlet Holding on September 4, 2024 and sell it today you would earn a total of  539.00  from holding Grocery Outlet Holding or generate 37.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Grocery Outlet Holding  vs.  UNITED TECHNOLOGIES P

Grocery Outlet Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 4 (%) 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.

UNITED TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITED TECHNOLOGIES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITED 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 UNITED

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

The idea behind Grocery Outlet Holding and UNITED TECHNOLOGIES P 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.