Correlation Between SPARTAN STORES and Dollarama

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

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

Diversification Opportunities for SPARTAN STORES and Dollarama

-0.49

Correlation Coefficient

SPARTAN STORES  Dollarama

Very good diversification

The 3 months correlation between SPARTAN and Dollarama is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES i.e., SPARTAN STORES and Dollarama go up and down completely randomly.

Pair Corralation between SPARTAN STORES and Dollarama

Assuming the 90 days trading horizon SPARTAN STORES is expected to under-perform the Dollarama. In addition to that, SPARTAN STORES is 1.66 times more volatile than Dollarama. It trades about 0.0 of its total potential returns per unit of risk. Dollarama is currently generating about 0.07 per unit of volatility. If you would invest  8,913  in Dollarama on September 13, 2024 and sell it today you would earn a total of  549.00  from holding Dollarama or generate 6.16% return on investment over 90 days.

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

SPARTAN STORES  vs.  Dollarama

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dollarama

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPARTAN STORES and Dollarama

The main advantage of trading using opposite SPARTAN STORES and Dollarama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES 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 SPARTAN STORES 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.