Correlation Between Dollar Tree and Campbell Soup
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Campbell Soup 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 Campbell Soup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Campbell Soup, you can compare the effects of market volatilities on Dollar Tree and Campbell Soup 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 Campbell Soup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Campbell Soup.
Diversification Opportunities for Dollar Tree and Campbell Soup
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dollar and Campbell is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup 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 Campbell Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Soup has no effect on the direction of Dollar Tree i.e., Dollar Tree and Campbell Soup go up and down completely randomly.
Pair Corralation between Dollar Tree and Campbell Soup
Given the investment horizon of 90 days Dollar Tree is expected to under-perform the Campbell Soup. But the stock apears to be less risky and, when comparing its historical volatility, Dollar Tree is 1.05 times less risky than Campbell Soup. The stock trades about -0.47 of its potential returns per unit of risk. The Campbell Soup is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,429 in Campbell Soup on January 31, 2024 and sell it today you would earn a total of 64.00 from holding Campbell Soup or generate 1.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Dollar Tree vs. Campbell Soup
Performance |
Timeline |
Dollar Tree |
Campbell Soup |
Dollar Tree and Campbell Soup Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dollar Tree and Campbell Soup
The main advantage of trading using opposite Dollar Tree and Campbell Soup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Campbell Soup 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 Campbell Soup will offset losses from the drop in Campbell Soup's long position.Dollar Tree vs. BJs Wholesale Club | Dollar Tree vs. Big Lots | Dollar Tree vs. Walmart | Dollar Tree vs. Target |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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