Correlation Between GEELY AUTOMOBILE and TRACTOR SUPPLY

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

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

Diversification Opportunities for GEELY AUTOMOBILE and TRACTOR SUPPLY

-0.03

Correlation Coefficient

GEELY AUTOMOBILE  TRACTOR SUPPLY

Good diversification

The 3 months correlation between GEELY and TRACTOR is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE and TRACTOR SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACTOR SUPPLY and GEELY AUTOMOBILE 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 GEELY AUTOMOBILE 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 GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and TRACTOR SUPPLY go up and down completely randomly.

Pair Corralation between GEELY AUTOMOBILE and TRACTOR SUPPLY

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 1.58 times more return on investment than TRACTOR SUPPLY. However, GEELY AUTOMOBILE is 1.58 times more volatile than TRACTOR SUPPLY. It trades about 0.06 of its potential returns per unit of risk. TRACTOR SUPPLY is currently generating about 0.06 per unit of risk. If you would invest  94.00  in GEELY AUTOMOBILE on October 4, 2024 and sell it today you would earn a total of  87.00  from holding GEELY AUTOMOBILE or generate 92.55% return on investment over 90 days.

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

GEELY AUTOMOBILE  vs.  TRACTOR SUPPLY

GEELY AUTOMOBILE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GEELY AUTOMOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GEELY AUTOMOBILE and TRACTOR SUPPLY

The main advantage of trading using opposite GEELY AUTOMOBILE and TRACTOR SUPPLY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEELY AUTOMOBILE 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 GEELY AUTOMOBILE 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.