Correlation Between Dollar General and Walmart

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

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

Diversification Opportunities for Dollar General and Walmart

-0.35

Correlation Coefficient

Dollar General  Walmart

Very good diversification

The 3 months correlation between Dollar and Walmart is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Dollar General i.e., Dollar General and Walmart go up and down completely randomly.

Pair Corralation between Dollar General and Walmart

Assuming the 90 days horizon Dollar General is expected to under-perform the Walmart. In addition to that, Dollar General is 1.87 times more volatile than Walmart. It trades about -0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.0 per unit of volatility. If you would invest  8,680  in Walmart on September 28, 2024 and sell it today you would lose (7.00) from holding Walmart or give up 0.08% of portfolio value over 90 days.

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

Dollar General  vs.  Walmart

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Walmart

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dollar General and Walmart

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

The idea behind Dollar General and Walmart 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.