Correlation Between Dollar General and Home Depot
Can any of the company-specific risk be diversified away by investing in both Dollar General and Home Depot 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 Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar General and Home Depot, you can compare the effects of market volatilities on Dollar General and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and Home Depot.
Diversification Opportunities for Dollar General and Home Depot
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dollar and Home is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Dollar General i.e., Dollar General and Home Depot go up and down completely randomly.
Pair Corralation between Dollar General and Home Depot
Allowing for the 90-day total investment horizon Dollar General is expected to generate 1.52 times more return on investment than Home Depot. However, Dollar General is 1.52 times more volatile than Home Depot. It trades about 0.09 of its potential returns per unit of risk. Home Depot is currently generating about -0.03 per unit of risk. If you would invest 13,019 in Dollar General on January 24, 2024 and sell it today you would earn a total of 1,266 from holding Dollar General or generate 9.72% 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. Home Depot
Performance |
| Timeline |
| Dollar General |
| Home Depot |
Dollar General and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar General and Home Depot
The main advantage of trading using opposite Dollar General and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Dollar General vs. Big Lots | Dollar General vs. Aquagold International | Dollar General vs. Thrivent High Yield | Dollar General vs. Morningstar Unconstrained Allocation |
| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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