Correlation Between Dollar General and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Dollar General and Costco Wholesale 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 Dollar General and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar General and Costco Wholesale, you can compare the effects of market volatilities on Dollar General and Costco Wholesale 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 Dollar General with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and Costco Wholesale.
Diversification Opportunities for Dollar General and Costco Wholesale
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dollar and Costco is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Dollar General 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 Dollar General are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Dollar General i.e., Dollar General and Costco Wholesale go up and down completely randomly.
Pair Corralation between Dollar General and Costco Wholesale
Assuming the 90 days horizon Dollar General is expected to under-perform the Costco Wholesale. In addition to that, Dollar General is 1.15 times more volatile than Costco Wholesale. It trades about -0.01 of its total potential returns per unit of risk. Costco Wholesale is currently generating about 0.31 per unit of volatility. If you would invest 82,171 in Costco Wholesale on August 29, 2024 and sell it today you would earn a total of 10,739 from holding Costco Wholesale or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar General vs. Costco Wholesale
Performance |
| Timeline |
| Dollar General |
| Costco Wholesale |
Dollar General and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar General and Costco Wholesale
The main advantage of trading using opposite Dollar General and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Dollar General vs. SPORT LISBOA E | Dollar General vs. Tyson Foods | Dollar General vs. USWE SPORTS AB | Dollar General vs. Zijin Mining Group |
| Costco Wholesale vs. Auto Trader Group | Costco Wholesale vs. National Retail Properties | Costco Wholesale vs. GRIFFIN MINING LTD | Costco Wholesale vs. RETAIL FOOD GROUP |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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