Correlation Between MarineMax and Tractor Supply

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

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

Diversification Opportunities for MarineMax and Tractor Supply

0.72

Correlation Coefficient

MarineMax  Tractor Supply

Poor diversification

The 3 months correlation between MarineMax and Tractor is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MarineMax and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply and MarineMax 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 MarineMax 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 MarineMax i.e., MarineMax and Tractor Supply go up and down completely randomly.

Pair Corralation between MarineMax and Tractor Supply

Considering the 90-day investment horizon MarineMax is expected to under-perform the Tractor Supply. In addition to that, MarineMax is 1.53 times more volatile than Tractor Supply. It trades about -0.01 of its total potential returns per unit of risk. Tractor Supply is currently generating about 0.01 per unit of volatility. If you would invest  5,369  in Tractor Supply on October 22, 2024 and sell it today you would lose (3.00) from holding Tractor Supply or give up 0.06% of portfolio value over 90 days.

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

MarineMax  vs.  Tractor Supply

MarineMax

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MarineMax and Tractor Supply

The main advantage of trading using opposite MarineMax and Tractor Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MarineMax 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 MarineMax 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.