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

0.33

Correlation Coefficient

Bunge  Dollar General

Weak diversification

The 3 months correlation between Bunge and Dollar is 0.33. 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 1.12 times less risky than Dollar General. The stock trades about -0.17 of its potential returns per unit of risk. The Dollar General is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,718  in Dollar General on December 1, 2024 and sell it today you would lose (300.00) from holding Dollar General or give up 3.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dollar General

Risk-Adjusted Performance

Very Weak

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

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.