Correlation Between Grocery Outlet and Big Lots

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

Diversification Opportunities for Grocery Outlet and Big Lots

-0.52

Correlation Coefficient

Grocery Outlet  Big Lots

Excellent diversification

The 3 months correlation between Grocery and Big is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots 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 Big Lots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Lots has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and Big Lots go up and down completely randomly.

Pair Corralation between Grocery Outlet and Big Lots

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Big Lots. But the stock apears to be less risky and, when comparing its historical volatility, Grocery Outlet Holding is 2.49 times less risky than Big Lots. The stock trades about -0.12 of its potential returns per unit of risk. The Big Lots is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  377.00  in Big Lots on February 5, 2024 and sell it today you would lose (18.00) from holding Big Lots or give up 4.77% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  Big Lots

Grocery Outlet Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Grocery Outlet may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Big Lots

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Grocery Outlet and Big Lots

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

The idea behind Grocery Outlet Holding and Big Lots 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.