Correlation Between Dollar Tree and Dollar General
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Dollar General 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 Dollar General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Dollar General, you can compare the effects of market volatilities on Dollar Tree and Dollar General 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 Dollar General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Dollar General.
Diversification Opportunities for Dollar Tree and Dollar General
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dollar and Dollar is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General 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 Dollar General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar General has no effect on the direction of Dollar Tree i.e., Dollar Tree and Dollar General go up and down completely randomly.
Pair Corralation between Dollar Tree and Dollar General
Assuming the 90 days horizon Dollar Tree is expected to generate 1.66 times more return on investment than Dollar General. However, Dollar Tree is 1.66 times more volatile than Dollar General. It trades about 0.21 of its potential returns per unit of risk. Dollar General is currently generating about -0.01 per unit of risk. If you would invest 5,820 in Dollar Tree on September 1, 2024 and sell it today you would earn a total of 943.00 from holding Dollar Tree or generate 16.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar Tree vs. Dollar General
Performance |
| Timeline |
| Dollar Tree |
| Dollar General |
Dollar Tree and Dollar General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and Dollar General
The main advantage of trading using opposite Dollar Tree and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Dollar General 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 General will offset losses from the drop in Dollar General's long position.| Dollar Tree vs. CARSALESCOM | Dollar Tree vs. National Retail Properties | Dollar Tree vs. Gruppo Mutuionline SpA | Dollar Tree vs. Pick n Pay |
| Dollar General vs. Grupo Carso SAB | Dollar General vs. Haverty Furniture Companies | Dollar General vs. Motorcar Parts of | Dollar General vs. CENTURIA OFFICE REIT |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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