Correlation Between Tractor Supply and DICKS Sporting

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

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

Diversification Opportunities for Tractor Supply and DICKS Sporting

0.5

Correlation Coefficient

Tractor Supply  DICKS Sporting

Very weak diversification

The 3 months correlation between Tractor and DICKS is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods 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 DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of Tractor Supply i.e., Tractor Supply and DICKS Sporting go up and down completely randomly.

Pair Corralation between Tractor Supply and DICKS Sporting

Assuming the 90 days horizon Tractor Supply is expected to generate 0.71 times more return on investment than DICKS Sporting. However, Tractor Supply is 1.41 times less risky than DICKS Sporting. It trades about 0.04 of its potential returns per unit of risk. DICKS Sporting Goods is currently generating about 0.01 per unit of risk. If you would invest  4,819  in Tractor Supply on September 23, 2024 and sell it today you would earn a total of  321.00  from holding Tractor Supply or generate 6.66% return on investment over 90 days.

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

Tractor Supply  vs.  DICKS Sporting Goods

Tractor Supply

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tractor Supply are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tractor Supply may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DICKS Sporting Goods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tractor Supply and DICKS Sporting

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

The idea behind Tractor Supply and DICKS Sporting Goods 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.