Correlation Between DOLLAR TREE and Lapidoth

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

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

Diversification Opportunities for DOLLAR TREE and Lapidoth

0.24

Correlation Coefficient

DOLLAR TREE  Lapidoth

Modest diversification

The 3 months correlation between DOLLAR and Lapidoth is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding DOLLAR TREE and Lapidoth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lapidoth 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 Lapidoth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lapidoth has no effect on the direction of DOLLAR TREE i.e., DOLLAR TREE and Lapidoth go up and down completely randomly.

Pair Corralation between DOLLAR TREE and Lapidoth

Assuming the 90 days trading horizon DOLLAR TREE is expected to under-perform the Lapidoth. But the stock apears to be less risky and, when comparing its historical volatility, DOLLAR TREE is 1.01 times less risky than Lapidoth. The stock trades about -0.06 of its potential returns per unit of risk. The Lapidoth is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  641,478  in Lapidoth on September 12, 2024 and sell it today you would earn a total of  53,522  from holding Lapidoth or generate 8.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.26%
Values	Daily Returns

DOLLAR TREE  vs.  Lapidoth

DOLLAR TREE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DOLLAR TREE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DOLLAR TREE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lapidoth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lapidoth are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lapidoth sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DOLLAR TREE and Lapidoth

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

The idea behind DOLLAR TREE and Lapidoth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.