Correlation Between Kroger and Dollar Tree

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

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

Diversification Opportunities for Kroger and Dollar Tree

-0.39

Correlation Coefficient

Kroger  Dollar Tree

Very good diversification

The 3 months correlation between Kroger and Dollar is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Kroger 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 Kroger Company are associated (or correlated) with Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of Kroger i.e., Kroger and Dollar Tree go up and down completely randomly.

Pair Corralation between Kroger and Dollar Tree

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 0.51 times more return on investment than Dollar Tree. However, Kroger Company is 1.97 times less risky than Dollar Tree. It trades about 0.08 of its potential returns per unit of risk. Dollar Tree is currently generating about 0.02 per unit of risk. If you would invest  6,204  in Kroger Company on December 27, 2024 and sell it today you would earn a total of  410.00  from holding Kroger Company or generate 6.61% return on investment over 90 days.

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

Kroger Company  vs.  Dollar Tree

Kroger Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dollar Tree

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Dollar Tree is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kroger and Dollar Tree

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

The idea behind Kroger Company and Dollar Tree 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.