Correlation Between Bunge and Dollar General

Can any of the company-specific risk be diversified away by investing in both Bunge 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 Bunge and Dollar General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bunge Limited and Dollar General, you can compare the effects of market volatilities on Bunge 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 Bunge with a short position of Dollar General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Dollar General.

Diversification Opportunities for Bunge and Dollar General

-0.22

Correlation Coefficient

Bunge  Dollar General

Very good diversification

The 3 months correlation between Bunge and Dollar is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General and Bunge 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 Bunge Limited 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 Bunge i.e., Bunge and Dollar General go up and down completely randomly.

Pair Corralation between Bunge and Dollar General

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Dollar General. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.39 times less risky than Dollar General. The stock trades about -0.03 of its potential returns per unit of risk. The Dollar General is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,504  in Dollar General on December 26, 2024 and sell it today you would earn a total of  966.00  from holding Dollar General or generate 12.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bunge Limited  vs.  Dollar General

Bunge Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Bunge is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Dollar General

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar General are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish technical and fundamental indicators, Dollar General reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bunge and Dollar General

The main advantage of trading using opposite Bunge and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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.

The idea behind Bunge Limited and Dollar General 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.