Correlation Between BBB Foods and Dollar Tree
Can any of the company-specific risk be diversified away by investing in both BBB Foods and Dollar Tree 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 BBB Foods and Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and Dollar Tree, you can compare the effects of market volatilities on BBB Foods and Dollar Tree 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 BBB Foods with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and Dollar Tree.
Diversification Opportunities for BBB Foods and Dollar Tree
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BBB and Dollar is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and BBB Foods 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 BBB Foods are associated (or correlated) with Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of BBB Foods i.e., BBB Foods and Dollar Tree go up and down completely randomly.
Pair Corralation between BBB Foods and Dollar Tree
Given the investment horizon of 90 days BBB Foods is expected to generate 1.13 times more return on investment than Dollar Tree. However, BBB Foods is 1.13 times more volatile than Dollar Tree. It trades about 0.07 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.09 per unit of risk. If you would invest 1,955 in BBB Foods on November 8, 2024 and sell it today you would earn a total of 902.00 from holding BBB Foods or generate 46.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBB Foods vs. Dollar Tree
Performance |
| Timeline |
| BBB Foods |
| Dollar Tree |
BBB Foods and Dollar Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and Dollar Tree
The main advantage of trading using opposite BBB Foods and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, Dollar Tree 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 Tree will offset losses from the drop in Dollar Tree's long position.The idea behind BBB Foods and Dollar Tree pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dollar Tree vs. BJs Wholesale Club | Dollar Tree vs. Walmart | Dollar Tree vs. Target | Dollar Tree 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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