Correlation Between Walmart and Dollar General

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

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

Diversification Opportunities for Walmart and Dollar General

-0.35

Correlation Coefficient

Walmart  Dollar General

Very good diversification

The 3 months correlation between Walmart and Dollar is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General and Walmart 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 Walmart 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 Walmart i.e., Walmart and Dollar General go up and down completely randomly.

Pair Corralation between Walmart and Dollar General

Assuming the 90 days trading horizon Walmart is expected to generate 0.44 times more return on investment than Dollar General. However, Walmart is 2.28 times less risky than Dollar General. It trades about 0.12 of its potential returns per unit of risk. Dollar General is currently generating about -0.08 per unit of risk. If you would invest  4,442  in Walmart on September 28, 2024 and sell it today you would earn a total of  4,145  from holding Walmart or generate 93.31% return on investment over 90 days.

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

Walmart  vs.  Dollar General

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Walmart and Dollar General

The main advantage of trading using opposite Walmart and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .