Correlation Between Dillards and Dollar Tree

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

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

Diversification Opportunities for Dillards and Dollar Tree

0.56

Correlation Coefficient

Dillards  Dollar Tree

Very weak diversification

The 3 months correlation between Dillards and Dollar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dillards and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and Dillards 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 Dillards 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 Dillards i.e., Dillards and Dollar Tree go up and down completely randomly.

Pair Corralation between Dillards and Dollar Tree

Considering the 90-day investment horizon Dillards is expected to under-perform the Dollar Tree. But the stock apears to be less risky and, when comparing its historical volatility, Dillards is 1.09 times less risky than Dollar Tree. The stock trades about -0.13 of its potential returns per unit of risk. The Dollar Tree is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,290  in Dollar Tree on January 10, 2025 and sell it today you would lose (33.00) from holding Dollar Tree or give up 0.45% of portfolio value over 90 days.

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

Dillards  vs.  Dollar Tree

Dillards

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dillards has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dollar Tree

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Dollar Tree is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dillards and Dollar Tree

The main advantage of trading using opposite Dillards and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dillards 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 Dillards 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.