Correlation Between Best Buy and Dollar Tree
Can any of the company-specific risk be diversified away by investing in both Best Buy 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 Best Buy and Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and Dollar Tree, you can compare the effects of market volatilities on Best Buy 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 Best Buy with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Dollar Tree.
Diversification Opportunities for Best Buy and Dollar Tree
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Best and Dollar is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Best Buy 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 Best Buy Co 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 Best Buy i.e., Best Buy and Dollar Tree go up and down completely randomly.
Pair Corralation between Best Buy and Dollar Tree
Considering the 90-day investment horizon Best Buy Co is expected to generate 0.83 times more return on investment than Dollar Tree. However, Best Buy Co is 1.2 times less risky than Dollar Tree. It trades about -0.01 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.03 per unit of risk. If you would invest 7,926 in Best Buy Co on January 24, 2024 and sell it today you would lose (414.00) from holding Best Buy Co or give up 5.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Best Buy Co vs. Dollar Tree
Performance |
| Timeline |
| Best Buy |
| Dollar Tree |
Best Buy and Dollar Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and Dollar Tree
The main advantage of trading using opposite Best Buy and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy 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.| Best Buy vs. Target | Best Buy vs. Walmart | Best Buy vs. Aquagold International | Best Buy vs. Thrivent High Yield |
| Dollar Tree vs. Big Lots | Dollar Tree vs. Aquagold International | Dollar Tree vs. Thrivent High Yield | Dollar Tree vs. Morningstar Unconstrained Allocation |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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