Correlation Between Dollar General and Greenlane Holdings

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

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

Diversification Opportunities for Dollar General and Greenlane Holdings

0.41

Correlation Coefficient

Dollar General  Greenlane Holdings

Very weak diversification

The 3 months correlation between Dollar and Greenlane is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Greenlane Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenlane Holdings and Dollar General 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 Dollar General are associated (or correlated) with Greenlane Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenlane Holdings has no effect on the direction of Dollar General i.e., Dollar General and Greenlane Holdings go up and down completely randomly.

Pair Corralation between Dollar General and Greenlane Holdings

Allowing for the 90-day total investment horizon Dollar General is expected to generate 14.46 times less return on investment than Greenlane Holdings. But when comparing it to its historical volatility, Dollar General is 4.17 times less risky than Greenlane Holdings. It trades about 0.04 of its potential returns per unit of risk. Greenlane Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Greenlane Holdings on January 24, 2024 and sell it today you would earn a total of  15.00  from holding Greenlane Holdings or generate 33.33% return on investment over 90 days.

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

Dollar General  vs.  Greenlane Holdings

Dollar General

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar General are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Dollar General may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Greenlane Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Greenlane Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Greenlane Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dollar General and Greenlane Holdings

The main advantage of trading using opposite Dollar General and Greenlane Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General position performs unexpectedly, Greenlane Holdings 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 Greenlane Holdings will offset losses from the drop in Greenlane Holdings' long position.

The idea behind Dollar General and Greenlane Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.