Correlation Between First State and Dollarama

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

By analyzing existing cross correlation between First State Financial and Dollarama, you can compare the effects of market volatilities on First State and Dollarama 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 First State with a short position of Dollarama. Check out your portfolio center. Please also check ongoing floating volatility patterns of First State and Dollarama.

Diversification Opportunities for First State and Dollarama

0.0

Correlation Coefficient

First State  Dollarama

Pay attention - limited upside

The 3 months correlation between First and Dollarama is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and First State 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 First State Financial are associated (or correlated) with Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of First State i.e., First State and Dollarama go up and down completely randomly.

Pair Corralation between First State and Dollarama

If you would invest  9,649  in Dollarama on December 29, 2024 and sell it today you would earn a total of  939.00  from holding Dollarama or generate 9.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First State Financial  vs.  Dollarama

First State Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First State Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First State is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dollarama

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First State and Dollarama

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

The idea behind First State Financial and Dollarama 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.