Correlation Between Dollar Tree and First Republic

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

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

Diversification Opportunities for Dollar Tree and First Republic

0.0

Correlation Coefficient

Dollar Tree  First Republic

Pay attention - limited upside

The 3 months correlation between Dollar and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank 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 First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of Dollar Tree i.e., Dollar Tree and First Republic go up and down completely randomly.

Pair Corralation between Dollar Tree and First Republic

If you would invest  130,400  in Dollar Tree on September 30, 2024 and sell it today you would earn a total of  22,474  from holding Dollar Tree or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Dollar Tree  vs.  First Republic Bank

Dollar Tree

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Dollar Tree may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, First Republic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dollar Tree and First Republic

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

The idea behind Dollar Tree and First Republic Bank 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 the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.