Correlation Between Dollar Tree and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Pentair PLC 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 Tree and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Pentair PLC, you can compare the effects of market volatilities on Dollar Tree and Pentair PLC 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 Tree with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Pentair PLC.
Diversification Opportunities for Dollar Tree and Pentair PLC
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dollar and Pentair is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Dollar Tree 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 Tree are associated (or correlated) with Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Dollar Tree i.e., Dollar Tree and Pentair PLC go up and down completely randomly.
Pair Corralation between Dollar Tree and Pentair PLC
Assuming the 90 days trading horizon Dollar Tree is expected to under-perform the Pentair PLC. In addition to that, Dollar Tree is 1.34 times more volatile than Pentair PLC. It trades about -0.05 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.11 per unit of volatility. If you would invest 4,495 in Pentair PLC on August 28, 2024 and sell it today you would earn a total of 6,365 from holding Pentair PLC or generate 141.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.14% |
| Values | Daily Returns |
Dollar Tree vs. Pentair PLC
Performance |
| Timeline |
| Dollar Tree |
| Pentair PLC |
Dollar Tree and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and Pentair PLC
The main advantage of trading using opposite Dollar Tree and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| Dollar Tree vs. Vitec Software Group | Dollar Tree vs. Ross Stores | Dollar Tree vs. Royal Bank of | Dollar Tree vs. Zegona Communications Plc |
| Pentair PLC vs. One Media iP | Pentair PLC vs. MTI Wireless Edge | Pentair PLC vs. Molson Coors Beverage | Pentair PLC vs. National Beverage Corp |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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