Correlation Between PriceSmart and Dollar General
Can any of the company-specific risk be diversified away by investing in both PriceSmart and Dollar General 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 PriceSmart and Dollar General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PriceSmart and Dollar General, you can compare the effects of market volatilities on PriceSmart and Dollar General 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 PriceSmart with a short position of Dollar General. Check out your portfolio center. Please also check ongoing floating volatility patterns of PriceSmart and Dollar General.
Diversification Opportunities for PriceSmart and Dollar General
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between PriceSmart and Dollar is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding PriceSmart and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General and PriceSmart 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 PriceSmart are associated (or correlated) with Dollar General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar General has no effect on the direction of PriceSmart i.e., PriceSmart and Dollar General go up and down completely randomly.
Pair Corralation between PriceSmart and Dollar General
Given the investment horizon of 90 days PriceSmart is expected to generate 0.39 times more return on investment than Dollar General. However, PriceSmart is 2.56 times less risky than Dollar General. It trades about 0.03 of its potential returns per unit of risk. Dollar General is currently generating about -0.14 per unit of risk. If you would invest 8,896 in PriceSmart on August 28, 2024 and sell it today you would earn a total of 196.00 from holding PriceSmart or generate 2.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PriceSmart vs. Dollar General
Performance |
| Timeline |
| PriceSmart |
| Dollar General |
PriceSmart and Dollar General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PriceSmart and Dollar General
The main advantage of trading using opposite PriceSmart and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PriceSmart position performs unexpectedly, Dollar General 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 Dollar General will offset losses from the drop in Dollar General's long position.| PriceSmart vs. Wal Mart de | PriceSmart vs. Pan Pacific International | PriceSmart vs. Dollarama | PriceSmart vs. Dollar General |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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