Correlation Between Dollar Tree and Various Eateries
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Various Eateries 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 Various Eateries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Various Eateries PLC, you can compare the effects of market volatilities on Dollar Tree and Various Eateries 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 Various Eateries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Various Eateries.
Diversification Opportunities for Dollar Tree and Various Eateries
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dollar and Various is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Various Eateries PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Various Eateries 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 Various Eateries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Various Eateries PLC has no effect on the direction of Dollar Tree i.e., Dollar Tree and Various Eateries go up and down completely randomly.
Pair Corralation between Dollar Tree and Various Eateries
Assuming the 90 days trading horizon Dollar Tree is expected to generate 1.43 times more return on investment than Various Eateries. However, Dollar Tree is 1.43 times more volatile than Various Eateries PLC. It trades about -0.05 of its potential returns per unit of risk. Various Eateries PLC is currently generating about -0.13 per unit of risk. If you would invest 13,373 in Dollar Tree on September 2, 2024 and sell it today you would lose (6,184) from holding Dollar Tree or give up 46.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.95% |
| Values | Daily Returns |
Dollar Tree vs. Various Eateries PLC
Performance |
| Timeline |
| Dollar Tree |
| Various Eateries PLC |
Dollar Tree and Various Eateries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and Various Eateries
The main advantage of trading using opposite Dollar Tree and Various Eateries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Various Eateries 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 Various Eateries will offset losses from the drop in Various Eateries' long position.| Dollar Tree vs. Smithson Investment Trust | Dollar Tree vs. Primary Health Properties | Dollar Tree vs. Taylor Maritime Investments | Dollar Tree vs. Schroders Investment Trusts |
| Various Eateries vs. Viridian Therapeutics | Various Eateries vs. CVR Energy | Various Eateries vs. Nationwide Building Society | Various Eateries vs. Dollar Tree |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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