Correlation Between Big Lots and Dollar Tree
Can any of the company-specific risk be diversified away by investing in both Big Lots 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 Big Lots and Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Lots and Dollar Tree, you can compare the effects of market volatilities on Big Lots 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 Big Lots with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Lots and Dollar Tree.
Diversification Opportunities for Big Lots and Dollar Tree
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Big and Dollar is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Big Lots 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 Big Lots 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 Big Lots i.e., Big Lots and Dollar Tree go up and down completely randomly.
Pair Corralation between Big Lots and Dollar Tree
Considering the 90-day investment horizon Big Lots is expected to generate 3.08 times more return on investment than Dollar Tree. However, Big Lots is 3.08 times more volatile than Dollar Tree. It trades about -0.04 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.29 per unit of risk. If you would invest 377.00 in Big Lots on February 5, 2024 and sell it today you would lose (18.00) from holding Big Lots or give up 4.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Lots vs. Dollar Tree
Performance |
| Timeline |
| Big Lots |
| Dollar Tree |
Big Lots and Dollar Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Lots and Dollar Tree
The main advantage of trading using opposite Big Lots and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots 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.| Big Lots vs. BJs Wholesale Club | Big Lots vs. Dollar General | Big Lots vs. Costco Wholesale Corp | Big Lots vs. Walmart |
| Dollar Tree vs. Home Federal Bancorp | Dollar Tree vs. Freedom Holding Corp | Dollar Tree vs. Schweizerische Nationalbank | Dollar Tree vs. Monroe Capital Corp |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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