Correlation Between Automatic Data and TRACTOR SUPPLY

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

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

Diversification Opportunities for Automatic Data and TRACTOR SUPPLY

0.18

Correlation Coefficient

Automatic Data  TRACTOR SUPPLY

Average diversification

The 3 months correlation between Automatic and TRACTOR is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and TRACTOR SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACTOR SUPPLY and Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and TRACTOR SUPPLY go up and down completely randomly.

Pair Corralation between Automatic Data and TRACTOR SUPPLY

Assuming the 90 days horizon Automatic Data is expected to generate 1.12 times less return on investment than TRACTOR SUPPLY. But when comparing it to its historical volatility, Automatic Data Processing is 1.63 times less risky than TRACTOR SUPPLY. It trades about 0.21 of its potential returns per unit of risk. TRACTOR SUPPLY is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,000  in TRACTOR SUPPLY on October 21, 2024 and sell it today you would earn a total of  196.00  from holding TRACTOR SUPPLY or generate 3.92% return on investment over 90 days.

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

Automatic Data Processing  vs.  TRACTOR SUPPLY

Automatic Data Processing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 rather sound basic indicators, TRACTOR SUPPLY is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Automatic Data and TRACTOR SUPPLY

The main advantage of trading using opposite Automatic Data and TRACTOR SUPPLY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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 Automatic Data Processing 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.