Correlation Between Dollar General and Village Super

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

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

Diversification Opportunities for Dollar General and Village Super

-0.42

Correlation Coefficient

Dollar General  Village Super

Very good diversification

The 3 months correlation between Dollar and Village is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Village Super Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Super Market 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 Village Super. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Super Market has no effect on the direction of Dollar General i.e., Dollar General and Village Super go up and down completely randomly.

Pair Corralation between Dollar General and Village Super

Allowing for the 90-day total investment horizon Dollar General is expected to generate 1.23 times more return on investment than Village Super. However, Dollar General is 1.23 times more volatile than Village Super Market. It trades about 0.06 of its potential returns per unit of risk. Village Super Market is currently generating about -0.29 per unit of risk. If you would invest  7,147  in Dollar General on December 5, 2024 and sell it today you would earn a total of  140.00  from holding Dollar General or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Dollar General  vs.  Village Super Market

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.

Village Super Market

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Village Super Market are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Village Super is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dollar General and Village Super

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

The idea behind Dollar General and Village Super Market 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.