Correlation Between TRACTOR SUPPLY and Vulcan Materials

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

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

Diversification Opportunities for TRACTOR SUPPLY and Vulcan Materials

0.02

Correlation Coefficient

TRACTOR SUPPLY  Vulcan Materials

Significant diversification

The 3 months correlation between TRACTOR and Vulcan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding TRACTOR SUPPLY and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and TRACTOR SUPPLY 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 TRACTOR SUPPLY are associated (or correlated) with Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of TRACTOR SUPPLY i.e., TRACTOR SUPPLY and Vulcan Materials go up and down completely randomly.

Pair Corralation between TRACTOR SUPPLY and Vulcan Materials

Assuming the 90 days trading horizon TRACTOR SUPPLY is expected to generate 1.99 times more return on investment than Vulcan Materials. However, TRACTOR SUPPLY is 1.99 times more volatile than Vulcan Materials. It trades about -0.2 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.43 per unit of risk. If you would invest  5,334  in TRACTOR SUPPLY on October 9, 2024 and sell it today you would lose (307.00) from holding TRACTOR SUPPLY or give up 5.76% of portfolio value over 90 days.

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

TRACTOR SUPPLY  vs.  Vulcan Materials

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 uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Vulcan Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRACTOR SUPPLY and Vulcan Materials

The main advantage of trading using opposite TRACTOR SUPPLY and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRACTOR SUPPLY position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.

The idea behind TRACTOR SUPPLY and Vulcan Materials 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.