Correlation Between Williams Sonoma and Tractor Supply

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

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

Diversification Opportunities for Williams Sonoma and Tractor Supply

0.61

Correlation Coefficient

Williams Sonoma  Tractor Supply

Poor diversification

The 3 months correlation between Williams and Tractor is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Williams Sonoma and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply and Williams Sonoma 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 Williams Sonoma are associated (or correlated) with Tractor Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tractor Supply has no effect on the direction of Williams Sonoma i.e., Williams Sonoma and Tractor Supply go up and down completely randomly.

Pair Corralation between Williams Sonoma and Tractor Supply

Considering the 90-day investment horizon Williams Sonoma is expected to under-perform the Tractor Supply. In addition to that, Williams Sonoma is 1.3 times more volatile than Tractor Supply. It trades about -0.09 of its total potential returns per unit of risk. Tractor Supply is currently generating about 0.03 per unit of volatility. If you would invest  5,238  in Tractor Supply on December 30, 2024 and sell it today you would earn a total of  109.00  from holding Tractor Supply or generate 2.08% return on investment over 90 days.

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

Williams Sonoma  vs.  Tractor Supply

Williams Sonoma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Williams Sonoma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Tractor Supply

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tractor Supply are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Williams Sonoma and Tractor Supply

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

The idea behind Williams Sonoma and Tractor Supply 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.