Correlation Between Dollar Tree and GB Group

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Can any of the company-specific risk be diversified away by investing in both Dollar Tree and GB Group 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 GB Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and GB Group plc, you can compare the effects of market volatilities on Dollar Tree and GB Group 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 GB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and GB Group.

Diversification Opportunities for Dollar Tree and GB Group

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Dollar and GBG is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and GB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GB Group plc 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 GB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GB Group plc has no effect on the direction of Dollar Tree i.e., Dollar Tree and GB Group go up and down completely randomly.

Pair Corralation between Dollar Tree and GB Group

Assuming the 90 days trading horizon Dollar Tree is expected to generate 1.72 times less return on investment than GB Group. But when comparing it to its historical volatility, Dollar Tree is 1.08 times less risky than GB Group. It trades about 0.06 of its potential returns per unit of risk. GB Group plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  32,100  in GB Group plc on September 5, 2024 and sell it today you would earn a total of  5,560  from holding GB Group plc or generate 17.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dollar Tree  vs.  GB Group plc

 Performance 
       Timeline  
Dollar Tree 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dollar Tree may actually be approaching a critical reversion point that can send shares even higher in January 2025.
GB Group plc 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in GB Group plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GB Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dollar Tree and GB Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dollar Tree and GB Group

The main advantage of trading using opposite Dollar Tree and GB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, GB Group 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 GB Group will offset losses from the drop in GB Group's long position.
The idea behind Dollar Tree and GB Group plc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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