Correlation Between Dollar Tree and Superior Plus
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Superior Plus 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 Superior Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Superior Plus Corp, you can compare the effects of market volatilities on Dollar Tree and Superior Plus 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 Superior Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Superior Plus.
Diversification Opportunities for Dollar Tree and Superior Plus
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dollar and Superior is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp 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 Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Dollar Tree i.e., Dollar Tree and Superior Plus go up and down completely randomly.
Pair Corralation between Dollar Tree and Superior Plus
Assuming the 90 days horizon Dollar Tree is expected to under-perform the Superior Plus. In addition to that, Dollar Tree is 1.19 times more volatile than Superior Plus Corp. It trades about -0.04 of its total potential returns per unit of risk. Superior Plus Corp is currently generating about -0.03 per unit of volatility. If you would invest 612.00 in Superior Plus Corp on October 5, 2024 and sell it today you would lose (202.00) from holding Superior Plus Corp or give up 33.01% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Dollar Tree vs. Superior Plus Corp
Performance |
Timeline |
Dollar Tree |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Superior Plus Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dollar Tree and Superior Plus Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dollar Tree and Superior Plus
The main advantage of trading using opposite Dollar Tree and Superior Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Superior Plus 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 Superior Plus will offset losses from the drop in Superior Plus' long position.The idea behind Dollar Tree and Superior Plus Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |