Correlation Between Adriatic Metals and Dollar Tree

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

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

Diversification Opportunities for Adriatic Metals and Dollar Tree

-0.53

Correlation Coefficient

Adriatic Metals  Dollar Tree

Excellent diversification

The 3 months correlation between Adriatic and Dollar is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Adriatic Metals 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 Adriatic Metals 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 Adriatic Metals i.e., Adriatic Metals and Dollar Tree go up and down completely randomly.

Pair Corralation between Adriatic Metals and Dollar Tree

Assuming the 90 days trading horizon Adriatic Metals is expected to generate 0.9 times more return on investment than Dollar Tree. However, Adriatic Metals is 1.12 times less risky than Dollar Tree. It trades about 0.14 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.02 per unit of risk. If you would invest  19,620  in Adriatic Metals on October 23, 2024 and sell it today you would earn a total of  1,230  from holding Adriatic Metals or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Adriatic Metals  vs.  Dollar Tree

Adriatic Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adriatic Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adriatic Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dollar Tree

Risk-Adjusted Performance

5 of 100

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 February 2025.

Pair Trading with Adriatic Metals and Dollar Tree

The main advantage of trading using opposite Adriatic Metals and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adriatic Metals 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 Adriatic Metals 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.

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.