Correlation Between Carrefour and Natural Grocers

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

By analyzing existing cross correlation between Carrefour SA and Natural Grocers by, you can compare the effects of market volatilities on Carrefour and Natural Grocers 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 Carrefour with a short position of Natural Grocers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrefour and Natural Grocers.

Diversification Opportunities for Carrefour and Natural Grocers

0.27

Correlation Coefficient

Carrefour  Natural Grocers

Modest diversification

The 3 months correlation between Carrefour and Natural is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Carrefour SA and Natural Grocers by in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Grocers by and Carrefour 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 Carrefour SA are associated (or correlated) with Natural Grocers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Grocers by has no effect on the direction of Carrefour i.e., Carrefour and Natural Grocers go up and down completely randomly.

Pair Corralation between Carrefour and Natural Grocers

Assuming the 90 days horizon Carrefour SA is expected to generate 0.76 times more return on investment than Natural Grocers. However, Carrefour SA is 1.32 times less risky than Natural Grocers. It trades about -0.05 of its potential returns per unit of risk. Natural Grocers by is currently generating about -0.07 per unit of risk. If you would invest  1,723  in Carrefour SA on February 3, 2024 and sell it today you would lose (23.00) from holding Carrefour SA or give up 1.33% of portfolio value over 90 days.

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

Carrefour SA  vs.  Natural Grocers by

Carrefour SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carrefour is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Natural Grocers by

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Grocers by are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Natural Grocers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carrefour and Natural Grocers

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

The idea behind Carrefour SA and Natural Grocers by 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.