Correlation Between Lapidoth and DOLLAR TREE

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

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

Diversification Opportunities for Lapidoth and DOLLAR TREE

0.18

Correlation Coefficient

Lapidoth  DOLLAR TREE

Average diversification

The 3 months correlation between Lapidoth and DOLLAR is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lapidoth and DOLLAR TREE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE and Lapidoth 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 Lapidoth 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 Lapidoth i.e., Lapidoth and DOLLAR TREE go up and down completely randomly.

Pair Corralation between Lapidoth and DOLLAR TREE

Assuming the 90 days trading horizon Lapidoth is expected to under-perform the DOLLAR TREE. But the stock apears to be less risky and, when comparing its historical volatility, Lapidoth is 1.31 times less risky than DOLLAR TREE. The stock trades about -0.11 of its potential returns per unit of risk. The DOLLAR TREE is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,228  in DOLLAR TREE on December 30, 2024 and sell it today you would lose (116.00) from holding DOLLAR TREE or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.25%
Values	Daily Returns

Lapidoth  vs.  DOLLAR TREE

Lapidoth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lapidoth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DOLLAR TREE

Risk-Adjusted Performance

Very Weak

Over the last 90 days DOLLAR TREE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, DOLLAR TREE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lapidoth and DOLLAR TREE

The main advantage of trading using opposite Lapidoth and DOLLAR TREE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lapidoth 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 Lapidoth 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.