Correlation Between Big Lots and Grocery Outlet

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Can any of the company-specific risk be diversified away by investing in both Big Lots 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 Big Lots and Grocery Outlet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Lots and Grocery Outlet Holding, you can compare the effects of market volatilities on Big Lots 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 Big Lots with a short position of Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Lots and Grocery Outlet.

Diversification Opportunities for Big Lots and Grocery Outlet

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Big Lots and Grocery is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots 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 Big Lots 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 Big Lots 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 Big Lots i.e., Big Lots and Grocery Outlet go up and down completely randomly.

Pair Corralation between Big Lots and Grocery Outlet

Considering the 90-day investment horizon Big Lots is expected to under-perform the Grocery Outlet. In addition to that, Big Lots is 2.48 times more volatile than Grocery Outlet Holding. It trades about -0.23 of its total potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.42 per unit of volatility. If you would invest  3,904  in Grocery Outlet Holding on July 5, 2022 and sell it today you would lose (597.00)  from holding Grocery Outlet Holding or give up 15.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Big Lots  vs.  Grocery Outlet Holding

 Performance (%) 
       Timeline  
Big Lots 
Big Lots Performance
0 of 100
Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Big Lots Price Channel

Grocery Outlet Holding 
Grocery Performance
0 of 100
Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in November 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Grocery Price Channel

Big Lots and Grocery Outlet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Big Lots and Grocery Outlet

The main advantage of trading using opposite Big Lots and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots 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.
Big Lots vs. Amazon Inc
The idea behind Big Lots 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.
Grocery Outlet vs. The Travelers Companies
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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