Correlation Between Dollar Tree and Boqii HoldingLtd

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

By analyzing existing cross correlation between Dollar Tree and Boqii HoldingLtd, you can compare the effects of market volatilities on Dollar Tree and Boqii HoldingLtd 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 Boqii HoldingLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Boqii HoldingLtd.

Diversification Opportunities for Dollar Tree and Boqii HoldingLtd

0.61

Correlation Coefficient

Dollar Tree Boqii HoldingLtd

Poor diversification

The 3 months correlation between Dollar and Boqii is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Boqii HoldingLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boqii HoldingLtd 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 Boqii HoldingLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boqii HoldingLtd has no effect on the direction of Dollar Tree i.e., Dollar Tree and Boqii HoldingLtd go up and down completely randomly.

Pair Corralation between Dollar Tree and Boqii HoldingLtd

Given the investment horizon of 90 days Dollar Tree is expected to under-perform the Boqii HoldingLtd. But the stock apears to be less risky and, when comparing its historical volatility, Dollar Tree is 1.5 times less risky than Boqii HoldingLtd. The stock trades about -0.23 of its potential returns per unit of risk. The Boqii HoldingLtd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  176.00  in Boqii HoldingLtd on March 3, 2023 and sell it today you would earn a total of  3.00  from holding Boqii HoldingLtd or generate 1.7% return on investment over 90 days.

Dollar Tree  vs.  Boqii HoldingLtd

Dollar Tree

Dollar Performance

0 of 100

Over the last 90 days Dollar Tree has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Boqii HoldingLtd

Boqii Performance

7 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Boqii HoldingLtd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Boqii HoldingLtd reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dollar Tree and Boqii HoldingLtd

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

The idea behind Dollar Tree and Boqii HoldingLtd 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.