Correlation Between Tractor Supply and Sally Beauty

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

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

Diversification Opportunities for Tractor Supply and Sally Beauty

0.39

Correlation Coefficient

Tractor Supply  Sally Beauty

Weak diversification

The 3 months correlation between Tractor and Sally is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and Sally Beauty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sally Beauty Holdings 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 Sally Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sally Beauty Holdings has no effect on the direction of Tractor Supply i.e., Tractor Supply and Sally Beauty go up and down completely randomly.

Pair Corralation between Tractor Supply and Sally Beauty

Given the investment horizon of 90 days Tractor Supply is expected to generate 2.34 times less return on investment than Sally Beauty. But when comparing it to its historical volatility, Tractor Supply is 2.0 times less risky than Sally Beauty. It trades about 0.02 of its potential returns per unit of risk. Sally Beauty Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,059  in Sally Beauty Holdings on October 7, 2024 and sell it today you would earn a total of  15.00  from holding Sally Beauty Holdings or generate 1.42% return on investment over 90 days.

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

Tractor Supply  vs.  Sally Beauty Holdings

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 unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sally Beauty Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sally Beauty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Tractor Supply and Sally Beauty

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

The idea behind Tractor Supply and Sally Beauty Holdings 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.