Correlation Between Dollar General and PriceSmart
Can any of the company-specific risk be diversified away by investing in both Dollar General and PriceSmart 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 PriceSmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar General and PriceSmart, you can compare the effects of market volatilities on Dollar General and PriceSmart 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 PriceSmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and PriceSmart.
Diversification Opportunities for Dollar General and PriceSmart
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dollar and PriceSmart is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and PriceSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PriceSmart 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 PriceSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PriceSmart has no effect on the direction of Dollar General i.e., Dollar General and PriceSmart go up and down completely randomly.
Pair Corralation between Dollar General and PriceSmart
Allowing for the 90-day total investment horizon Dollar General is expected to under-perform the PriceSmart. But the stock apears to be less risky and, when comparing its historical volatility, Dollar General is 1.11 times less risky than PriceSmart. The stock trades about -0.07 of its potential returns per unit of risk. The PriceSmart is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 8,931 in PriceSmart on August 31, 2024 and sell it today you would earn a total of 57.00 from holding PriceSmart or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar General vs. PriceSmart
Performance |
| Timeline |
| Dollar General |
| PriceSmart |
Dollar General and PriceSmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar General and PriceSmart
The main advantage of trading using opposite Dollar General and PriceSmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General position performs unexpectedly, PriceSmart 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 PriceSmart will offset losses from the drop in PriceSmart's long position.| Dollar General vs. BJs Wholesale Club | Dollar General vs. Costco Wholesale Corp | Dollar General vs. Walmart | Dollar General vs. Dollar Tree |
| PriceSmart vs. Wal Mart de | PriceSmart vs. Pan Pacific International | PriceSmart vs. Dollarama | PriceSmart vs. Dollar General |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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