Correlation Between Dollar General and Performance Food

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

By analyzing existing cross correlation between Dollar General and Performance Food Group, you can compare the effects of market volatilities on Dollar General and Performance Food 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 Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and Performance Food.

Diversification Opportunities for Dollar General and Performance Food

-0.63

Correlation Coefficient

Dollar General  Performance Food

Excellent diversification

The 3 months correlation between Dollar and Performance is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Dollar General i.e., Dollar General and Performance Food go up and down completely randomly.

Pair Corralation between Dollar General and Performance Food

Allowing for the 90-day total investment horizon Dollar General is expected to under-perform the Performance Food. In addition to that, Dollar General is 1.84 times more volatile than Performance Food Group. It trades about -0.04 of its total potential returns per unit of risk. Performance Food Group is currently generating about 0.09 per unit of volatility. If you would invest  6,075  in Performance Food Group on October 1, 2024 and sell it today you would earn a total of  2,431  from holding Performance Food Group or generate 40.02% return on investment over 90 days.

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

Dollar General  vs.  Performance Food Group

Dollar General

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dollar General has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Performance Food

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Performance Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dollar General and Performance Food

The main advantage of trading using opposite Dollar General and Performance Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General position performs unexpectedly, Performance Food 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 Performance Food will offset losses from the drop in Performance Food's long position.

The idea behind Dollar General and Performance Food Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.