Correlation Between PREMIER FOODS and Dollar General

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

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

Diversification Opportunities for PREMIER FOODS and Dollar General

-0.28

Correlation Coefficient

PREMIER FOODS  Dollar General

Very good diversification

The 3 months correlation between PREMIER and Dollar is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General and PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS i.e., PREMIER FOODS and Dollar General go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Dollar General

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 19.1 times less return on investment than Dollar General. But when comparing it to its historical volatility, PREMIER FOODS is 1.56 times less risky than Dollar General. It trades about 0.01 of its potential returns per unit of risk. Dollar General is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,230  in Dollar General on September 15, 2024 and sell it today you would earn a total of  320.00  from holding Dollar General or generate 4.43% return on investment over 90 days.

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

PREMIER FOODS  vs.  Dollar General

PREMIER FOODS

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 nearly stable basic indicators, Dollar General is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PREMIER FOODS and Dollar General

The main advantage of trading using opposite PREMIER FOODS and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS 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 PREMIER FOODS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.