Correlation Between Pure Cycle and Grocery Outlet

Can any of the company-specific risk be diversified away by investing in both Pure Cycle and Grocery Outlet 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 Pure Cycle and Grocery Outlet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pure Cycle and Grocery Outlet Holding, you can compare the effects of market volatilities on Pure Cycle and Grocery Outlet 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 Pure Cycle with a short position of Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Cycle and Grocery Outlet.

Diversification Opportunities for Pure Cycle and Grocery Outlet

0.86

Correlation Coefficient

Pure Cycle  Grocery Outlet

Very poor diversification

The 3 months correlation between Pure and Grocery is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding and Pure Cycle 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 Pure Cycle are associated (or correlated) with Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of Pure Cycle i.e., Pure Cycle and Grocery Outlet go up and down completely randomly.

Pair Corralation between Pure Cycle and Grocery Outlet

Given the investment horizon of 90 days Pure Cycle is expected to generate 0.66 times more return on investment than Grocery Outlet. However, Pure Cycle is 1.51 times less risky than Grocery Outlet. It trades about 0.18 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about 0.07 per unit of risk. If you would invest  1,094  in Pure Cycle on September 17, 2024 and sell it today you would earn a total of  241.00  from holding Pure Cycle or generate 22.03% return on investment over 90 days.

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

Pure Cycle  vs.  Grocery Outlet Holding

Pure Cycle

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Pure Cycle displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Pure Cycle and Grocery Outlet

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

The idea behind Pure Cycle and Grocery Outlet Holding 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.