Correlation Between Sparebanken Vest and Dollar Tree

Can any of the company-specific risk be diversified away by investing in both Sparebanken Vest 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 Sparebanken Vest and Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparebanken Vest and Dollar Tree, you can compare the effects of market volatilities on Sparebanken Vest 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 Sparebanken Vest with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebanken Vest and Dollar Tree.

Diversification Opportunities for Sparebanken Vest and Dollar Tree

-0.01

Correlation Coefficient

Sparebanken Vest  Dollar Tree

Good diversification

The 3 months correlation between Sparebanken and Dollar is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Vest and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Sparebanken Vest 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 Sparebanken Vest 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 Sparebanken Vest i.e., Sparebanken Vest and Dollar Tree go up and down completely randomly.

Pair Corralation between Sparebanken Vest and Dollar Tree

Assuming the 90 days trading horizon Sparebanken Vest is expected to generate 0.57 times more return on investment than Dollar Tree. However, Sparebanken Vest is 1.76 times less risky than Dollar Tree. It trades about 0.06 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.05 per unit of risk. If you would invest  14,022  in Sparebanken Vest on December 25, 2024 and sell it today you would earn a total of  648.00  from holding Sparebanken Vest or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sparebanken Vest  vs.  Dollar Tree

Sparebanken Vest

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Vest are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sparebanken Vest is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dollar Tree

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dollar Tree has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sparebanken Vest and Dollar Tree

The main advantage of trading using opposite Sparebanken Vest and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebanken Vest 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 Sparebanken Vest 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.