Correlation Between Clean Power and Dollar Tree

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

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

Diversification Opportunities for Clean Power and Dollar Tree

0.72

Correlation Coefficient

Clean Power  Dollar Tree

Poor diversification

The 3 months correlation between Clean and Dollar is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Clean Power Hydrogen and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Clean Power 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 Clean Power Hydrogen 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 Clean Power i.e., Clean Power and Dollar Tree go up and down completely randomly.

Pair Corralation between Clean Power and Dollar Tree

Assuming the 90 days trading horizon Clean Power Hydrogen is expected to under-perform the Dollar Tree. But the stock apears to be less risky and, when comparing its historical volatility, Clean Power Hydrogen is 1.16 times less risky than Dollar Tree. The stock trades about -0.13 of its potential returns per unit of risk. The Dollar Tree is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,338  in Dollar Tree on December 23, 2024 and sell it today you would lose (698.00) from holding Dollar Tree or give up 9.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Clean Power Hydrogen  vs.  Dollar Tree

Clean Power Hydrogen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clean Power Hydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dollar Tree

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dollar Tree has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Clean Power and Dollar Tree

The main advantage of trading using opposite Clean Power and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Power 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 Clean Power Hydrogen 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.