Correlation Between PSQ Holdings and Tractor Supply

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

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

Diversification Opportunities for PSQ Holdings and Tractor Supply

0.01

Correlation Coefficient

PSQ Holdings  Tractor Supply

Significant diversification

The 3 months correlation between PSQ and Tractor is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding PSQ Holdings and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply and PSQ Holdings 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 PSQ Holdings 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 PSQ Holdings i.e., PSQ Holdings and Tractor Supply go up and down completely randomly.

Pair Corralation between PSQ Holdings and Tractor Supply

Given the investment horizon of 90 days PSQ Holdings is expected to under-perform the Tractor Supply. In addition to that, PSQ Holdings is 2.73 times more volatile than Tractor Supply. It trades about -0.08 of its total potential returns per unit of risk. Tractor Supply is currently generating about 0.0 per unit of volatility. If you would invest  5,427  in Tractor Supply on December 24, 2024 and sell it today you would lose (74.00) from holding Tractor Supply or give up 1.36% of portfolio value over 90 days.

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

PSQ Holdings  vs.  Tractor Supply

PSQ Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PSQ Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tractor Supply

Risk-Adjusted Performance

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 very healthy fundamental indicators, Tractor Supply is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PSQ Holdings and Tractor Supply

The main advantage of trading using opposite PSQ Holdings and Tractor Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSQ Holdings 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 PSQ Holdings 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.