Correlation Between Apple and Dollar Tree

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

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

Diversification Opportunities for Apple and Dollar Tree

0.67

Correlation Coefficient

Apple  Dollar Tree

Poor diversification

The 3 months correlation between Apple and Dollar is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Apple 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 Apple Inc 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 Apple i.e., Apple and Dollar Tree go up and down completely randomly.

Pair Corralation between Apple and Dollar Tree

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.43 times more return on investment than Dollar Tree. However, Apple Inc is 2.31 times less risky than Dollar Tree. It trades about 0.11 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.05 per unit of risk. If you would invest  20,096  in Apple Inc on September 29, 2024 and sell it today you would earn a total of  4,339  from holding Apple Inc or generate 21.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Dollar Tree

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dollar Tree

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Apple and Dollar Tree

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

The idea behind Apple Inc and Dollar Tree 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.