Correlation Between Dollar Tree and Litigation Capital

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

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

Diversification Opportunities for Dollar Tree and Litigation Capital

-0.47

Correlation Coefficient

Dollar Tree  Litigation Capital

Very good diversification

The 3 months correlation between Dollar and Litigation is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Litigation Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litigation Capital 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 Litigation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litigation Capital has no effect on the direction of Dollar Tree i.e., Dollar Tree and Litigation Capital go up and down completely randomly.

Pair Corralation between Dollar Tree and Litigation Capital

Assuming the 90 days trading horizon Dollar Tree is expected to generate 0.93 times more return on investment than Litigation Capital. However, Dollar Tree is 1.07 times less risky than Litigation Capital. It trades about 0.05 of its potential returns per unit of risk. Litigation Capital Management is currently generating about -0.42 per unit of risk. If you would invest  7,342  in Dollar Tree on October 6, 2024 and sell it today you would earn a total of  97.00  from holding Dollar Tree or generate 1.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Dollar Tree  vs.  Litigation Capital Management

Dollar Tree

Risk-Adjusted Performance

4 of 100

Modest

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 uncertain basic indicators, Dollar Tree may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Litigation Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litigation Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Litigation Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dollar Tree and Litigation Capital

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

The idea behind Dollar Tree and Litigation Capital Management 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.