Correlation Between Davis Commodities and Grocery Outlet
Can any of the company-specific risk be diversified away by investing in both Davis Commodities 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 Davis Commodities and Grocery Outlet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Commodities Limited and Grocery Outlet Holding, you can compare the effects of market volatilities on Davis Commodities 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 Davis Commodities with a short position of Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Commodities and Grocery Outlet.
Diversification Opportunities for Davis Commodities and Grocery Outlet
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Davis and Grocery is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited 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 Davis Commodities 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 Davis Commodities Limited 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 Davis Commodities i.e., Davis Commodities and Grocery Outlet go up and down completely randomly.
Pair Corralation between Davis Commodities and Grocery Outlet
Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the Grocery Outlet. But the stock apears to be less risky and, when comparing its historical volatility, Davis Commodities Limited is 1.34 times less risky than Grocery Outlet. The stock trades about -0.26 of its potential returns per unit of risk. The Grocery Outlet Holding is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 1,430 in Grocery Outlet Holding on September 1, 2024 and sell it today you would earn a total of 670.00 from holding Grocery Outlet Holding or generate 46.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Commodities Limited vs. Grocery Outlet Holding
Performance |
| Timeline |
| Davis Commodities |
| Grocery Outlet Holding |
Davis Commodities and Grocery Outlet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Commodities and Grocery Outlet
The main advantage of trading using opposite Davis Commodities and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Commodities 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.| Davis Commodities vs. Kinetik Holdings | Davis Commodities vs. Western Midstream Partners | Davis Commodities vs. WEC Energy Group | Davis Commodities vs. GE Vernova LLC |
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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 the Global Correlations module to find global opportunities by holding instruments from different markets.
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