Correlation Between Carmat SA and Dollar Tree

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

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

Diversification Opportunities for Carmat SA and Dollar Tree

-0.57

Correlation Coefficient

Carmat SA  Dollar Tree

Excellent diversification

The 3 months correlation between Carmat and Dollar is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Carmat SA and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Carmat SA 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 Carmat SA 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 Carmat SA i.e., Carmat SA and Dollar Tree go up and down completely randomly.

Pair Corralation between Carmat SA and Dollar Tree

Assuming the 90 days horizon Carmat SA is expected to under-perform the Dollar Tree. In addition to that, Carmat SA is 2.58 times more volatile than Dollar Tree. It trades about -0.05 of its total potential returns per unit of risk. Dollar Tree is currently generating about -0.04 per unit of volatility. If you would invest  13,428  in Dollar Tree on September 28, 2024 and sell it today you would lose (6,462) from holding Dollar Tree or give up 48.12% of portfolio value over 90 days.

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

Carmat SA  vs.  Dollar Tree

Carmat SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

Pair Trading with Carmat SA and Dollar Tree

The main advantage of trading using opposite Carmat SA and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carmat SA 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 Carmat SA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.