Correlation Between Dollar General and Buscar

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

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

Diversification Opportunities for Dollar General and Buscar

0.42

Correlation Coefficient

Dollar General  Buscar

Very weak diversification

The 3 months correlation between Dollar and Buscar is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Buscar Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buscar 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 Buscar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buscar has no effect on the direction of Dollar General i.e., Dollar General and Buscar go up and down completely randomly.

Pair Corralation between Dollar General and Buscar

Allowing for the 90-day total investment horizon Dollar General is expected to generate 11.73 times less return on investment than Buscar. But when comparing it to its historical volatility, Dollar General is 8.73 times less risky than Buscar. It trades about 0.13 of its potential returns per unit of risk. Buscar Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.25  in Buscar Co on July 2, 2024 and sell it today you would earn a total of  0.10  from holding Buscar Co or generate 40.0% 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.  Buscar Co

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in October 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Buscar

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Dollar General and Buscar

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

The idea behind Dollar General and Buscar Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.