Correlation Between Dollar Tree and PriceSmart
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and PriceSmart 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 PriceSmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and PriceSmart, you can compare the effects of market volatilities on Dollar Tree and PriceSmart 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 PriceSmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and PriceSmart.
Diversification Opportunities for Dollar Tree and PriceSmart
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dollar and PriceSmart is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and PriceSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PriceSmart 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 PriceSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PriceSmart has no effect on the direction of Dollar Tree i.e., Dollar Tree and PriceSmart go up and down completely randomly.
Pair Corralation between Dollar Tree and PriceSmart
Given the investment horizon of 90 days Dollar Tree is expected to under-perform the PriceSmart. In addition to that, Dollar Tree is 1.38 times more volatile than PriceSmart. It trades about -0.05 of its total potential returns per unit of risk. PriceSmart is currently generating about 0.06 per unit of volatility. If you would invest 6,071 in PriceSmart on August 31, 2024 and sell it today you would earn a total of 2,903 from holding PriceSmart or generate 47.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar Tree vs. PriceSmart
Performance |
| Timeline |
| Dollar Tree |
| PriceSmart |
Dollar Tree and PriceSmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and PriceSmart
The main advantage of trading using opposite Dollar Tree and PriceSmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, PriceSmart 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 PriceSmart will offset losses from the drop in PriceSmart's long position.| Dollar Tree vs. BJs Wholesale Club | Dollar Tree vs. Walmart | Dollar Tree vs. Target | Dollar Tree vs. Dollar General |
| PriceSmart vs. Wal Mart de | PriceSmart vs. Pan Pacific International | PriceSmart vs. Dollarama | PriceSmart vs. Dollar General |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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