Correlation Between Leslies and Tractor Supply

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

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

Diversification Opportunities for Leslies and Tractor Supply

0.25

Correlation Coefficient

Leslies  Tractor Supply

Modest diversification

The 3 months correlation between Leslies and Tractor is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Leslies and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply and Leslies 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 Leslies 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 Leslies i.e., Leslies and Tractor Supply go up and down completely randomly.

Pair Corralation between Leslies and Tractor Supply

Given the investment horizon of 90 days Leslies is expected to under-perform the Tractor Supply. In addition to that, Leslies is 4.08 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 0.02 per unit of volatility. If you would invest  5,104  in Tractor Supply on October 7, 2024 and sell it today you would earn a total of  89.00  from holding Tractor Supply or generate 1.74% return on investment over 90 days.

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

Leslies  vs.  Tractor Supply

Leslies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leslies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Leslies is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional 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 Leslies and Tractor Supply

The main advantage of trading using opposite Leslies and Tractor Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leslies 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 Leslies 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.