Correlation Between Dollar Tree and Real Good
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Real Good 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 Real Good into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Real Good Food, you can compare the effects of market volatilities on Dollar Tree and Real Good 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 Real Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Real Good.
Diversification Opportunities for Dollar Tree and Real Good
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dollar and Real is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Real Good Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Good Food 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 Real Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Good Food has no effect on the direction of Dollar Tree i.e., Dollar Tree and Real Good go up and down completely randomly.
Pair Corralation between Dollar Tree and Real Good
Given the investment horizon of 90 days Dollar Tree is expected to under-perform the Real Good. But the stock apears to be less risky and, when comparing its historical volatility, Dollar Tree is 11.27 times less risky than Real Good. The stock trades about -0.05 of its potential returns per unit of risk. The Real Good Food is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5,160 in Real Good Food on November 9, 2024 and sell it today you would lose (5,146) from holding Real Good Food or give up 99.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.96% |
| Values | Daily Returns |
Dollar Tree vs. Real Good Food
Performance |
| Timeline |
| Dollar Tree |
| Real Good Food |
Risk-Adjusted Performance
Modest
Weak | Strong |
Dollar Tree and Real Good Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and Real Good
The main advantage of trading using opposite Dollar Tree and Real Good positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Real Good 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 Real Good will offset losses from the drop in Real Good's long position.| Dollar Tree vs. BJs Wholesale Club | Dollar Tree vs. Walmart | Dollar Tree vs. Target | Dollar Tree vs. Dollar General |
| Real Good vs. Seneca Foods Corp | Real Good vs. Central Garden Pet | Real Good vs. Central Garden Pet | Real Good vs. Natures Sunshine Products |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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