Correlation Between Dollar Tree and US Foods
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and US Foods 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 US Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and US Foods Holding, you can compare the effects of market volatilities on Dollar Tree and US Foods 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 US Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and US Foods.
Diversification Opportunities for Dollar Tree and US Foods
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dollar and USFD is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and US Foods Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Foods Holding 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 US Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Foods Holding has no effect on the direction of Dollar Tree i.e., Dollar Tree and US Foods go up and down completely randomly.
Pair Corralation between Dollar Tree and US Foods
Given the investment horizon of 90 days Dollar Tree is expected to generate 2.28 times less return on investment than US Foods. In addition to that, Dollar Tree is 2.16 times more volatile than US Foods Holding. It trades about 0.1 of its total potential returns per unit of risk. US Foods Holding is currently generating about 0.48 per unit of volatility. If you would invest 6,100 in US Foods Holding on August 27, 2024 and sell it today you would earn a total of 889.00 from holding US Foods Holding or generate 14.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar Tree vs. US Foods Holding
Performance |
| Timeline |
| Dollar Tree |
| US Foods Holding |
Dollar Tree and US Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and US Foods
The main advantage of trading using opposite Dollar Tree and US Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, US Foods 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 US Foods will offset losses from the drop in US Foods' long position.| Dollar Tree vs. Innovative Food Hldg | Dollar Tree vs. Calavo Growers | Dollar Tree vs. The Chefs Warehouse | Dollar Tree vs. AMCON Distributing |
| US Foods vs. The Chefs Warehouse | US Foods vs. Sysco | US Foods vs. SpartanNash Co | US Foods vs. Calavo Growers |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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