Correlation Between Tractor Supply and Genuine Parts

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

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

Diversification Opportunities for Tractor Supply and Genuine Parts

0.41

Correlation Coefficient

Tractor Supply  Genuine Parts

Very weak diversification

The 3 months correlation between Tractor and Genuine is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and Genuine Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Tractor Supply i.e., Tractor Supply and Genuine Parts go up and down completely randomly.

Pair Corralation between Tractor Supply and Genuine Parts

Assuming the 90 days horizon Tractor Supply is expected to generate 0.89 times more return on investment than Genuine Parts. However, Tractor Supply is 1.12 times less risky than Genuine Parts. It trades about 0.09 of its potential returns per unit of risk. Genuine Parts is currently generating about 0.0 per unit of risk. If you would invest  3,413  in Tractor Supply on September 23, 2024 and sell it today you would earn a total of  1,727  from holding Tractor Supply or generate 50.6% 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.  Genuine Parts

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.

Genuine Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genuine Parts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genuine Parts is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tractor Supply and Genuine Parts

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

The idea behind Tractor Supply and Genuine Parts 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.