Correlation Between Kroger and Dollar General

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

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

Diversification Opportunities for Kroger and Dollar General

0.66

Correlation Coefficient

Kroger  Dollar General

Poor diversification

The 3 months correlation between Kroger and Dollar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General and Kroger 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 Kroger Company 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 Kroger i.e., Kroger and Dollar General go up and down completely randomly.

Pair Corralation between Kroger and Dollar General

Allowing for the 90-day total investment horizon Kroger is expected to generate 2.38 times less return on investment than Dollar General. But when comparing it to its historical volatility, Kroger Company is 1.61 times less risky than Dollar General. It trades about 0.08 of its potential returns per unit of risk. Dollar General is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,530  in Dollar General on December 27, 2024 and sell it today you would earn a total of  1,224  from holding Dollar General or generate 16.25% return on investment over 90 days.

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

Kroger Company  vs.  Dollar General

Kroger Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dollar General

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar General are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish technical and fundamental indicators, Dollar General reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kroger and Dollar General

The main advantage of trading using opposite Kroger and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger 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 Kroger Company 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.