Correlation Between Dollar General and PriceSmart

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

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

Diversification Opportunities for Dollar General and PriceSmart

0.02

Correlation Coefficient

Dollar General  PriceSmart

Significant diversification

The 3 months correlation between Dollar and PriceSmart is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and PriceSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PriceSmart 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 PriceSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PriceSmart has no effect on the direction of Dollar General i.e., Dollar General and PriceSmart go up and down completely randomly.

Pair Corralation between Dollar General and PriceSmart

Allowing for the 90-day total investment horizon Dollar General is expected to generate 2.06 times less return on investment than PriceSmart. In addition to that, Dollar General is 1.48 times more volatile than PriceSmart. It trades about 0.04 of its total potential returns per unit of risk. PriceSmart is currently generating about 0.13 per unit of volatility. If you would invest  7,923  in PriceSmart on February 16, 2024 and sell it today you would earn a total of  801.00  from holding PriceSmart or generate 10.11% return on investment over 90 days.

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

Dollar General  vs.  PriceSmart

Dollar General

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar General are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Dollar General is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

PriceSmart

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PriceSmart are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, PriceSmart may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Dollar General and PriceSmart

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

The idea behind Dollar General and PriceSmart 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.