Correlation Between Dollar General and Wal Mart
Can any of the company-specific risk be diversified away by investing in both Dollar General and Wal Mart 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 Wal Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar General and Wal Mart de, you can compare the effects of market volatilities on Dollar General and Wal Mart 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 Wal Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and Wal Mart.
Diversification Opportunities for Dollar General and Wal Mart
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dollar and Wal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Wal Mart de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de 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 Wal Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of Dollar General i.e., Dollar General and Wal Mart go up and down completely randomly.
Pair Corralation between Dollar General and Wal Mart
Allowing for the 90-day total investment horizon Dollar General is expected to generate 1.13 times more return on investment than Wal Mart. However, Dollar General is 1.13 times more volatile than Wal Mart de. It trades about -0.13 of its potential returns per unit of risk. Wal Mart de is currently generating about -0.17 per unit of risk. If you would invest 8,110 in Dollar General on August 27, 2024 and sell it today you would lose (451.00) from holding Dollar General or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar General vs. Wal Mart de
Performance |
| Timeline |
| Dollar General |
| Wal Mart de |
Dollar General and Wal Mart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar General and Wal Mart
The main advantage of trading using opposite Dollar General and Wal Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General position performs unexpectedly, Wal Mart 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 Wal Mart will offset losses from the drop in Wal Mart's long position.| Dollar General vs. Innovative Food Hldg | Dollar General vs. Calavo Growers | Dollar General vs. The Chefs Warehouse | Dollar General vs. AMCON Distributing |
| Wal Mart vs. Embotelladora Andina SA | Wal Mart vs. Signet International Holdings | Wal Mart vs. National Beverage Corp | Wal Mart vs. PT Astra International |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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