Correlation Between Dollar General and Target

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Can any of the company-specific risk be diversified away by investing in both Dollar General and Target 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 Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar General and Target, you can compare the effects of market volatilities on Dollar General and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and Target.

Diversification Opportunities for Dollar General and Target

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Dollar and Target is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Dollar General i.e., Dollar General and Target go up and down completely randomly.

Pair Corralation between Dollar General and Target

Allowing for the 90-day total investment horizon Dollar General is expected to under-perform the Target. In addition to that, Dollar General is 1.17 times more volatile than Target. It trades about -0.1 of its total potential returns per unit of risk. Target is currently generating about 0.06 per unit of volatility. If you would invest  13,579  in Target on November 4, 2024 and sell it today you would earn a total of  212.00  from holding Target or generate 1.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dollar General  vs.  Target

 Performance 
       Timeline  
Dollar General 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dollar General 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Target 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Target is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dollar General and Target Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dollar General and Target

The main advantage of trading using opposite Dollar General and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.
The idea behind Dollar General and Target 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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