Correlation Between Dollar Tree and Best Buy
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Best Buy 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 Dollar Tree and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Best Buy Co, you can compare the effects of market volatilities on Dollar Tree and Best Buy 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 Dollar Tree with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Best Buy.
Diversification Opportunities for Dollar Tree and Best Buy
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dollar and Best is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Dollar Tree 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 Dollar Tree are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Dollar Tree i.e., Dollar Tree and Best Buy go up and down completely randomly.
Pair Corralation between Dollar Tree and Best Buy
Given the investment horizon of 90 days Dollar Tree is expected to under-perform the Best Buy. In addition to that, Dollar Tree is 1.03 times more volatile than Best Buy Co. It trades about -0.12 of its total potential returns per unit of risk. Best Buy Co is currently generating about -0.08 per unit of volatility. If you would invest 7,859 in Best Buy Co on January 20, 2024 and sell it today you would lose (244.00) from holding Best Buy Co or give up 3.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar Tree vs. Best Buy Co
Performance |
| Timeline |
| Dollar Tree |
| Best Buy |
Dollar Tree and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and Best Buy
The main advantage of trading using opposite Dollar Tree and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| Dollar Tree vs. Aquagold International | Dollar Tree vs. Morningstar Unconstrained Allocation | Dollar Tree vs. Thrivent High Yield | Dollar Tree vs. Via Renewables |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |