Correlation Between Tractor Supply and Macys

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

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

Diversification Opportunities for Tractor Supply and Macys

0.19

Correlation Coefficient

Tractor Supply  Macys

Average diversification

The 3 months correlation between Tractor and Macys is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Tractor Supply i.e., Tractor Supply and Macys go up and down completely randomly.

Pair Corralation between Tractor Supply and Macys

Given the investment horizon of 90 days Tractor Supply is expected to under-perform the Macys. But the stock apears to be less risky and, when comparing its historical volatility, Tractor Supply is 1.42 times less risky than Macys. The stock trades about -0.15 of its potential returns per unit of risk. The Macys Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,577  in Macys Inc on September 25, 2024 and sell it today you would earn a total of  91.50  from holding Macys Inc or generate 5.8% return on investment over 90 days.

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

Tractor Supply  vs.  Macys Inc

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 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.

Macys Inc

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Macys displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tractor Supply and Macys

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

The idea behind Tractor Supply and Macys Inc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.