Correlation Between Grocery Outlet and Analog Devices

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

Diversification Opportunities for Grocery Outlet and Analog Devices

0.18

Correlation Coefficient

Grocery Outlet  Analog Devices

Average diversification

The 3 months correlation between Grocery and Analog is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Analog Devices go up and down completely randomly.

Pair Corralation between Grocery Outlet and Analog Devices

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Analog Devices. In addition to that, Grocery Outlet is 1.07 times more volatile than Analog Devices. It trades about -0.02 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.04 per unit of volatility. If you would invest  17,466  in Analog Devices on January 29, 2024 and sell it today you would earn a total of  2,731  from holding Analog Devices or generate 15.64% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Analog Devices

Grocery Outlet Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Analog Devices

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Grocery Outlet and Analog Devices

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

The idea behind Grocery Outlet Holding and Analog Devices 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.