Correlation Between Dollar Tree and Rayonier Advanced

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

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

Diversification Opportunities for Dollar Tree and Rayonier Advanced

-0.35

Correlation Coefficient

Dollar Tree  Rayonier Advanced

Very good diversification

The 3 months correlation between Dollar and Rayonier is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Dollar Tree i.e., Dollar Tree and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Dollar Tree and Rayonier Advanced

Assuming the 90 days horizon Dollar Tree is expected to generate 0.68 times more return on investment than Rayonier Advanced. However, Dollar Tree is 1.48 times less risky than Rayonier Advanced. It trades about 0.1 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about 0.04 per unit of risk. If you would invest  6,023  in Dollar Tree on October 25, 2024 and sell it today you would earn a total of  880.00  from holding Dollar Tree or generate 14.61% return on investment over 90 days.

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

Dollar Tree  vs.  Rayonier Advanced Materials

Dollar Tree

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dollar Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Rayonier Advanced

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier Advanced Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rayonier Advanced may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dollar Tree and Rayonier Advanced

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

The idea behind Dollar Tree and Rayonier Advanced Materials 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.