Correlation Between Dollar Tree and Naturhouse Health

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

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

Diversification Opportunities for Dollar Tree and Naturhouse Health

0.44

Correlation Coefficient

Dollar Tree  Naturhouse Health

Very weak diversification

The 3 months correlation between Dollar and Naturhouse is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Naturhouse Health SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturhouse Health 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 Naturhouse Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturhouse Health has no effect on the direction of Dollar Tree i.e., Dollar Tree and Naturhouse Health go up and down completely randomly.

Pair Corralation between Dollar Tree and Naturhouse Health

Assuming the 90 days trading horizon Dollar Tree is expected to under-perform the Naturhouse Health. In addition to that, Dollar Tree is 3.46 times more volatile than Naturhouse Health SA. It trades about -0.03 of its total potential returns per unit of risk. Naturhouse Health SA is currently generating about -0.08 per unit of volatility. If you would invest  181.00  in Naturhouse Health SA on September 2, 2024 and sell it today you would lose (13.00) from holding Naturhouse Health SA or give up 7.18% of portfolio value over 90 days.

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

Dollar Tree  vs.  Naturhouse Health SA

Dollar Tree

Risk-Adjusted Performance

0 of 100

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 uncertain 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.

Naturhouse Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naturhouse Health SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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 Dollar Tree and Naturhouse Health

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

The idea behind Dollar Tree and Naturhouse Health SA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.