Correlation Between Dollarama and Dollar Tree
Can any of the company-specific risk be diversified away by investing in both Dollarama and Dollar Tree 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 Dollarama and Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollarama and Dollar Tree, you can compare the effects of market volatilities on Dollarama and Dollar Tree 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 Dollarama with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollarama and Dollar Tree.
Diversification Opportunities for Dollarama and Dollar Tree
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dollarama and Dollar is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Dollarama 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 Dollarama are associated (or correlated) with Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of Dollarama i.e., Dollarama and Dollar Tree go up and down completely randomly.
Pair Corralation between Dollarama and Dollar Tree
Assuming the 90 days horizon Dollarama is expected to under-perform the Dollar Tree. But the pink sheet apears to be less risky and, when comparing its historical volatility, Dollarama is 2.65 times less risky than Dollar Tree. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Dollar Tree is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,626 in Dollar Tree on August 27, 2024 and sell it today you would earn a total of 352.00 from holding Dollar Tree or generate 5.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollarama vs. Dollar Tree
Performance |
| Timeline |
| Dollarama |
| Dollar Tree |
Dollarama and Dollar Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollarama and Dollar Tree
The main advantage of trading using opposite Dollarama and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollarama position performs unexpectedly, Dollar Tree 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 Dollar Tree will offset losses from the drop in Dollar Tree's long position.| Dollarama vs. Wal Mart de | Dollarama vs. Pan Pacific International | Dollarama vs. PriceSmart | Dollarama vs. Dollar General |
| Dollar Tree vs. Innovative Food Hldg | Dollar Tree vs. Calavo Growers | Dollar Tree vs. The Chefs Warehouse | Dollar Tree vs. AMCON Distributing |
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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