Correlation Between Dollar Tree and Sow Good

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

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

Diversification Opportunities for Dollar Tree and Sow Good

-0.64

Correlation Coefficient

Dollar Tree  Sow Good

Excellent diversification

The 3 months correlation between Dollar and Sow is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Sow Good Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sow Good Common 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 Sow Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sow Good Common has no effect on the direction of Dollar Tree i.e., Dollar Tree and Sow Good go up and down completely randomly.

Pair Corralation between Dollar Tree and Sow Good

Given the investment horizon of 90 days Dollar Tree is expected to generate 0.22 times more return on investment than Sow Good. However, Dollar Tree is 4.46 times less risky than Sow Good. It trades about 0.04 of its potential returns per unit of risk. Sow Good Common is currently generating about 0.0 per unit of risk. If you would invest  7,256  in Dollar Tree on October 6, 2024 and sell it today you would earn a total of  80.00  from holding Dollar Tree or generate 1.1% return on investment over 90 days.

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

Dollar Tree  vs.  Sow Good Common

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 February 2025.

Sow Good Common

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dollar Tree and Sow Good

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

The idea behind Dollar Tree and Sow Good Common 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.