Correlation Between Dollarama and Big Lots

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

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

Diversification Opportunities for Dollarama and Big Lots

0.43

Correlation Coefficient

Dollarama  Big Lots

Very weak diversification

The 3 months correlation between Dollarama and Big is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots and Dollarama 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 Dollarama are associated (or correlated) with Big Lots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Lots has no effect on the direction of Dollarama i.e., Dollarama and Big Lots go up and down completely randomly.

Pair Corralation between Dollarama and Big Lots

If you would invest  10.00  in Big Lots on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Big Lots or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Dollarama  vs.  Big Lots

Dollarama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dollarama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dollarama is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Big Lots

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Big Lots is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dollarama and Big Lots

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

The idea behind Dollarama and Big Lots 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.