Correlation Between Sea and DOLLAR

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

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

Diversification Opportunities for Sea and DOLLAR

-0.28

Correlation Coefficient

Sea  DOLLAR

Very good diversification

The 3 months correlation between Sea and DOLLAR is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sea and DOLLAR TREE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE INC and Sea 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 Sea are associated (or correlated) with DOLLAR. 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 INC has no effect on the direction of Sea i.e., Sea and DOLLAR go up and down completely randomly.

Pair Corralation between Sea and DOLLAR

Allowing for the 90-day total investment horizon Sea is expected to under-perform the DOLLAR. In addition to that, Sea is 14.97 times more volatile than DOLLAR TREE INC. It trades about -0.14 of its total potential returns per unit of risk. DOLLAR TREE INC is currently generating about 0.1 per unit of volatility. If you would invest  9,961  in DOLLAR TREE INC on October 9, 2024 and sell it today you would earn a total of  25.00  from holding DOLLAR TREE INC or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Sea  vs.  DOLLAR TREE INC

Sea

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

DOLLAR TREE INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DOLLAR TREE INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DOLLAR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sea and DOLLAR

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

The idea behind Sea and DOLLAR TREE INC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..