Correlation Between Loblaw Companies and Dollarama

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

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

Diversification Opportunities for Loblaw Companies and Dollarama

0.18

Correlation Coefficient

Loblaw Companies  Dollarama

Average diversification

The 3 months correlation between Loblaw and Dollarama is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and Loblaw Companies 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 Loblaw Companies Limited are associated (or correlated) with Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Dollarama go up and down completely randomly.

Pair Corralation between Loblaw Companies and Dollarama

Given the investment horizon of 90 days Loblaw Companies Limited is expected to under-perform the Dollarama. But the stock apears to be less risky and, when comparing its historical volatility, Loblaw Companies Limited is 1.32 times less risky than Dollarama. The stock trades about -0.01 of its potential returns per unit of risk. The Dollarama is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  17,157  in Dollarama on May 6, 2025 and sell it today you would earn a total of  1,810  from holding Dollarama or generate 10.55% return on investment over 90 days.

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

Loblaw Companies Limited  vs.  Dollarama

Loblaw Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loblaw Companies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Loblaw Companies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dollarama

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Loblaw Companies and Dollarama

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

The idea behind Loblaw Companies Limited and Dollarama 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.