Correlation Between Quaker Chemical and TRACTOR SUPPLY

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

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

Diversification Opportunities for Quaker Chemical and TRACTOR SUPPLY

0.35

Correlation Coefficient

Quaker Chemical  TRACTOR SUPPLY

Weak diversification

The 3 months correlation between Quaker and TRACTOR is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and TRACTOR SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACTOR SUPPLY and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and TRACTOR SUPPLY go up and down completely randomly.

Pair Corralation between Quaker Chemical and TRACTOR SUPPLY

Assuming the 90 days horizon Quaker Chemical is expected to under-perform the TRACTOR SUPPLY. In addition to that, Quaker Chemical is 1.0 times more volatile than TRACTOR SUPPLY. It trades about -0.09 of its total potential returns per unit of risk. TRACTOR SUPPLY is currently generating about -0.05 per unit of volatility. If you would invest  5,127  in TRACTOR SUPPLY on December 23, 2024 and sell it today you would lose (360.00) from holding TRACTOR SUPPLY or give up 7.02% of portfolio value over 90 days.

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

Quaker Chemical  vs.  TRACTOR SUPPLY

Quaker Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Quaker Chemical and TRACTOR SUPPLY

The main advantage of trading using opposite Quaker Chemical and TRACTOR SUPPLY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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 Quaker Chemical 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.