Correlation Between Basic Materials and Dollar General
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Dollar General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Dollar General, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Dollar General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Dollar General.
Diversification Opportunities for Basic Materials and Dollar General
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Basic and Dollar is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Dollar General go up and down completely randomly.
Pair Corralation between Basic Materials and Dollar General
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.54 times more return on investment than Dollar General. However, Basic Materials is 1.85 times less risky than Dollar General. It trades about 0.05 of its potential returns per unit of risk. Dollar General is currently generating about -0.01 per unit of risk. If you would invest 540,301 in Basic Materials on September 23, 2024 and sell it today you would earn a total of 19,702 from holding Basic Materials or generate 3.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.46% |
Values | Daily Returns |
Basic Materials vs. Dollar General
Performance |
Timeline |
Basic Materials and Dollar General Volatility Contrast
Predicted Return Density |
Returns |
Basic Materials
Pair trading matchups for Basic Materials
Dollar General
Pair trading matchups for Dollar General
Pair Trading with Basic Materials and Dollar General
The main advantage of trading using opposite Basic Materials and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.Basic Materials vs. Cognizant Technology Solutions | Basic Materials vs. T Mobile | Basic Materials vs. Lupatech SA | Basic Materials vs. Uber Technologies |
Dollar General vs. Walmart | Dollar General vs. Costco Wholesale | Dollar General vs. Target | Dollar General vs. AvalonBay Communities |
Check out your portfolio center.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 CEOs Directory module to screen CEOs from public companies around the world.
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