Correlation Between Dollar Tree and Moneta Money

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

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

Diversification Opportunities for Dollar Tree and Moneta Money

0.8

Correlation Coefficient

Dollar Tree  Moneta Money

Very poor diversification

The 3 months correlation between Dollar and Moneta is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Moneta Money Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moneta Money Bank 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 Moneta Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moneta Money Bank has no effect on the direction of Dollar Tree i.e., Dollar Tree and Moneta Money go up and down completely randomly.

Pair Corralation between Dollar Tree and Moneta Money

Assuming the 90 days trading horizon Dollar Tree is expected to generate 505.89 times more return on investment than Moneta Money. However, Dollar Tree is 505.89 times more volatile than Moneta Money Bank. It trades about 0.06 of its potential returns per unit of risk. Moneta Money Bank is currently generating about 0.13 per unit of risk. If you would invest  6,976  in Dollar Tree on October 8, 2024 and sell it today you would earn a total of  463.00  from holding Dollar Tree or generate 6.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Dollar Tree  vs.  Moneta Money Bank

Dollar Tree

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Dollar Tree may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Moneta Money Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moneta Money Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Moneta Money is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dollar Tree and Moneta Money

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

The idea behind Dollar Tree and Moneta Money Bank 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.