Correlation Between EBay and Tractor Supply
Can any of the company-specific risk be diversified away by investing in both EBay 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 EBay and Tractor Supply into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between eBay Inc and Tractor Supply, you can compare the effects of market volatilities on EBay 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 EBay with a short position of Tractor Supply. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Tractor Supply.
Diversification Opportunities for EBay and Tractor Supply
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EBay and Tractor is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply and EBay 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 eBay Inc 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 EBay i.e., EBay and Tractor Supply go up and down completely randomly.
Pair Corralation between EBay and Tractor Supply
Assuming the 90 days horizon eBay Inc is expected to generate 0.89 times more return on investment than Tractor Supply. However, eBay Inc is 1.13 times less risky than Tractor Supply. It trades about 0.09 of its potential returns per unit of risk. Tractor Supply is currently generating about 0.01 per unit of risk. If you would invest 4,932 in eBay Inc on September 24, 2024 and sell it today you would earn a total of 1,174 from holding eBay Inc or generate 23.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
eBay Inc vs. Tractor Supply
Performance |
| Timeline |
| eBay Inc |
| Tractor Supply |
EBay and Tractor Supply Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EBay and Tractor Supply
The main advantage of trading using opposite EBay and Tractor Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay 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 eBay Inc 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.| Tractor Supply vs. MercadoLibre | Tractor Supply vs. OReilly Automotive | Tractor Supply vs. AutoZone | Tractor Supply vs. Ulta Beauty |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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