Correlation Between Dollar Tree and Consumer Staples

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

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

Diversification Opportunities for Dollar Tree and Consumer Staples

-0.36

Correlation Coefficient

Dollar Tree  Consumer Staples

Very good diversification

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

Pair Corralation between Dollar Tree and Consumer Staples

Given the investment horizon of 90 days Dollar Tree is expected to generate 1.79 times more return on investment than Consumer Staples. However, Dollar Tree is 1.79 times more volatile than Consumer Staples Portfolio. It trades about -0.01 of its potential returns per unit of risk. Consumer Staples Portfolio is currently generating about -0.43 per unit of risk. If you would invest  7,280  in Dollar Tree on October 11, 2024 and sell it today you would lose (83.00) from holding Dollar Tree or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Dollar Tree  vs.  Consumer Staples Portfolio

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 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.

Consumer Staples Por

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumer Staples Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dollar Tree and Consumer Staples

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

The idea behind Dollar Tree and Consumer Staples Portfolio 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..