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

-0.59

Correlation Coefficient

Dollar Tree  Campbell Soup

Excellent diversification

The 3 months correlation between Dollar and Campbell is -0.59. 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. In addition to that, Dollar Tree is 1.68 times more volatile than Campbell Soup. It trades about -0.01 of its total potential returns per unit of risk. Campbell Soup is currently generating about 0.0 per unit of volatility. If you would invest  4,635  in Campbell Soup on January 31, 2024 and sell it today you would lose (142.00) from holding Campbell Soup or give up 3.06% of portfolio value over 90 days.

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

Dollar Tree  vs.  Campbell Soup

Dollar Tree

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dollar Tree has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Campbell Soup

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Campbell Soup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Campbell Soup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

The idea behind Dollar Tree and Campbell Soup 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.