Correlation Between JD SPORTS and TRACTOR SUPPLY

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

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

Diversification Opportunities for JD SPORTS and TRACTOR SUPPLY

-0.17

Correlation Coefficient

JD SPORTS  TRACTOR SUPPLY

Good diversification

The 3 months correlation between 9JD and TRACTOR is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding JD SPORTS FASH and TRACTOR SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACTOR SUPPLY and JD SPORTS 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 JD SPORTS FASH are associated (or correlated) with TRACTOR SUPPLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRACTOR SUPPLY has no effect on the direction of JD SPORTS i.e., JD SPORTS and TRACTOR SUPPLY go up and down completely randomly.

Pair Corralation between JD SPORTS and TRACTOR SUPPLY

Assuming the 90 days horizon JD SPORTS FASH is expected to under-perform the TRACTOR SUPPLY. But the stock apears to be less risky and, when comparing its historical volatility, JD SPORTS FASH is 1.03 times less risky than TRACTOR SUPPLY. The stock trades about -0.39 of its potential returns per unit of risk. The TRACTOR SUPPLY is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  5,344  in TRACTOR SUPPLY on October 9, 2024 and sell it today you would lose (257.00) from holding TRACTOR SUPPLY or give up 4.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

JD SPORTS FASH  vs.  TRACTOR SUPPLY

JD SPORTS FASH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD SPORTS FASH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TRACTOR SUPPLY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRACTOR SUPPLY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TRACTOR SUPPLY is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JD SPORTS and TRACTOR SUPPLY

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

The idea behind JD SPORTS FASH and TRACTOR SUPPLY 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.