Correlation Between Bunge and Dollar General
Can any of the company-specific risk be diversified away by investing in both Bunge 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 Bunge and Dollar General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and Dollar General, you can compare the effects of market volatilities on Bunge 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 Bunge with a short position of Dollar General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Dollar General.
Diversification Opportunities for Bunge and Dollar General
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bunge and Dollar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General and Bunge 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 Bunge Limited 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 Bunge i.e., Bunge and Dollar General go up and down completely randomly.
Pair Corralation between Bunge and Dollar General
Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.72 times more return on investment than Dollar General. However, Bunge Limited is 1.39 times less risky than Dollar General. It trades about 0.33 of its potential returns per unit of risk. Dollar General is currently generating about -0.19 per unit of risk. If you would invest 9,669 in Bunge Limited on January 18, 2024 and sell it today you would earn a total of 873.00 from holding Bunge Limited or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bunge Limited vs. Dollar General
Performance |
| Timeline |
| Bunge Limited |
| Dollar General |
Bunge and Dollar General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bunge and Dollar General
The main advantage of trading using opposite Bunge and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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 Bunge Limited 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.| Dollar General vs. BJs Wholesale Club | Dollar General vs. Big Lots | Dollar General vs. Costco Wholesale Corp | Dollar General vs. Walmart |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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