Correlation Between Dollar Tree and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and MGP Ingredients 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 MGP Ingredients into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and MGP Ingredients, you can compare the effects of market volatilities on Dollar Tree and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and MGP Ingredients.
Diversification Opportunities for Dollar Tree and MGP Ingredients
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dollar and MGP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Dollar Tree i.e., Dollar Tree and MGP Ingredients go up and down completely randomly.
Pair Corralation between Dollar Tree and MGP Ingredients
Given the investment horizon of 90 days Dollar Tree is expected to generate 0.92 times more return on investment than MGP Ingredients. However, Dollar Tree is 1.09 times less risky than MGP Ingredients. It trades about -0.04 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.23 per unit of risk. If you would invest 8,165 in Dollar Tree on August 31, 2024 and sell it today you would lose (1,015) from holding Dollar Tree or give up 12.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar Tree vs. MGP Ingredients
Performance |
| Timeline |
| Dollar Tree |
| MGP Ingredients |
Dollar Tree and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and MGP Ingredients
The main advantage of trading using opposite Dollar Tree and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Dollar Tree vs. BJs Wholesale Club | Dollar Tree vs. Walmart | Dollar Tree vs. Target | Dollar Tree vs. Dollar General |
| MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Diageo PLC ADR | MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Constellation Brands Class |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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