Correlation Between Dollar Tree and Uber Technologies

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

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

Diversification Opportunities for Dollar Tree and Uber Technologies

-0.18

Correlation Coefficient

Dollar Tree  Uber Technologies

Good diversification

The 3 months correlation between Dollar and Uber is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Dollar Tree i.e., Dollar Tree and Uber Technologies go up and down completely randomly.

Pair Corralation between Dollar Tree and Uber Technologies

Assuming the 90 days trading horizon Dollar Tree is expected to generate 16.36 times less return on investment than Uber Technologies. In addition to that, Dollar Tree is 1.09 times more volatile than Uber Technologies. It trades about 0.01 of its total potential returns per unit of risk. Uber Technologies is currently generating about 0.12 per unit of volatility. If you would invest  6,070  in Uber Technologies on December 30, 2024 and sell it today you would earn a total of  1,240  from holding Uber Technologies or generate 20.43% return on investment over 90 days.

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

Dollar Tree  vs.  Uber Technologies

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 comparatively stable basic indicators, Dollar Tree is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Uber Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Uber Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dollar Tree and Uber Technologies

The main advantage of trading using opposite Dollar Tree and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.

The idea behind Dollar Tree and Uber Technologies 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.