Correlation Between Dollar Tree and Big Rock

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

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

Diversification Opportunities for Dollar Tree and Big Rock

-0.36

Correlation Coefficient

Dollar Tree  Big Rock

Very good diversification

The 3 months correlation between Dollar and Big is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery 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 Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of Dollar Tree i.e., Dollar Tree and Big Rock go up and down completely randomly.

Pair Corralation between Dollar Tree and Big Rock

If you would invest  6,681  in Dollar Tree on September 5, 2024 and sell it today you would earn a total of  567.00  from holding Dollar Tree or generate 8.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Dollar Tree  vs.  Big Rock Brewery

Dollar Tree

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Dollar Tree may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Big Rock is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dollar Tree and Big Rock

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

The idea behind Dollar Tree and Big Rock Brewery 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.