Correlation Between Dollar Tree and Chefs Warehouse

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

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

Diversification Opportunities for Dollar Tree and Chefs Warehouse

0.33

Correlation Coefficient

Dollar Tree  Chefs Warehouse

Weak diversification

The 3 months correlation between Dollar and Chefs is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and The Chefs Warehouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chefs Warehouse 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 Chefs Warehouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chefs Warehouse has no effect on the direction of Dollar Tree i.e., Dollar Tree and Chefs Warehouse go up and down completely randomly.

Pair Corralation between Dollar Tree and Chefs Warehouse

Given the investment horizon of 90 days Dollar Tree is expected to generate 0.92 times more return on investment than Chefs Warehouse. However, Dollar Tree is 1.09 times less risky than Chefs Warehouse. It trades about 0.12 of its potential returns per unit of risk. The Chefs Warehouse is currently generating about 0.02 per unit of risk. If you would invest  9,753  in Dollar Tree on September 16, 2025 and sell it today you would earn a total of  3,364  from holding Dollar Tree or generate 34.49% return on investment over 90 days.

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

Dollar Tree  vs.  The Chefs Warehouse

Dollar Tree

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Dollar Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Chefs Warehouse

Risk-Adjusted Performance

Weakest

Over the last 90 days The Chefs Warehouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Chefs Warehouse is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dollar Tree and Chefs Warehouse

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

The idea behind Dollar Tree and The Chefs Warehouse 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.