Correlation Between Dollar Tree and Alico

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

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

Diversification Opportunities for Dollar Tree and Alico

0.06

Correlation Coefficient

Dollar Tree  Alico

Significant diversification

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

Pair Corralation between Dollar Tree and Alico

Given the investment horizon of 90 days Dollar Tree is expected to generate 3.43 times less return on investment than Alico. But when comparing it to its historical volatility, Dollar Tree is 1.04 times less risky than Alico. It trades about 0.03 of its potential returns per unit of risk. Alico Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,548  in Alico Inc on December 28, 2024 and sell it today you would earn a total of  444.00  from holding Alico Inc or generate 17.43% return on investment over 90 days.

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

Dollar Tree  vs.  Alico Inc

Dollar Tree

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Dollar Tree is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Alico Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Alico displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dollar Tree and Alico

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

The idea behind Dollar Tree and Alico Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.