Correlation Between Kellanova and Dollar Tree

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

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

Diversification Opportunities for Kellanova and Dollar Tree

-0.32

Correlation Coefficient

Kellanova  Dollar Tree

Very good diversification

The 3 months correlation between Kellanova and Dollar is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Kellanova and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Kellanova 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 Kellanova 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 Kellanova i.e., Kellanova and Dollar Tree go up and down completely randomly.

Pair Corralation between Kellanova and Dollar Tree

Taking into account the 90-day investment horizon Kellanova is expected to generate 11.54 times less return on investment than Dollar Tree. But when comparing it to its historical volatility, Kellanova is 12.9 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 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,356  in Dollar Tree on September 4, 2024 and sell it today you would earn a total of  925.00  from holding Dollar Tree or generate 14.55% return on investment over 90 days.

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

Kellanova  vs.  Dollar Tree

Kellanova

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

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. Even with relatively weak basic indicators, Dollar Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kellanova and Dollar Tree

The main advantage of trading using opposite Kellanova and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellanova 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 Kellanova 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.