Correlation Between Superior Plus and Dollar Tree

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

By analyzing existing cross correlation between Superior Plus Corp and Dollar Tree, you can compare the effects of market volatilities on Superior Plus and Dollar Tree 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 Superior Plus with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Dollar Tree.

Diversification Opportunities for Superior Plus and Dollar Tree

-0.06

Correlation Coefficient

Superior Plus  Dollar Tree

Good diversification

The 3 months correlation between Superior and Dollar is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of Superior Plus i.e., Superior Plus and Dollar Tree go up and down completely randomly.

Pair Corralation between Superior Plus and Dollar Tree

Assuming the 90 days horizon Superior Plus Corp is expected to generate 0.84 times more return on investment than Dollar Tree. However, Superior Plus Corp is 1.19 times less risky than Dollar Tree. It trades about -0.03 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.04 per unit of risk. If you would invest  612.00  in Superior Plus Corp on October 5, 2024 and sell it today you would lose (202.00) from holding Superior Plus Corp or give up 33.01% of portfolio value over 90 days.

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

Superior Plus Corp  vs.  Dollar Tree

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dollar Tree

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Dollar Tree has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Dollar Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and Dollar Tree

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

The idea behind Superior Plus Corp and Dollar Tree 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.