Correlation Between GM and Tractor Supply
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Tractor Supply into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tractor Supply, you can compare the effects of market volatilities on GM 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 GM with a short position of Tractor Supply. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tractor Supply.
Diversification Opportunities for GM and Tractor Supply
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Tractor is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply and GM 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 General Motors 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 GM i.e., GM and Tractor Supply go up and down completely randomly.
Pair Corralation between GM and Tractor Supply
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.26 times more return on investment than Tractor Supply. However, GM is 1.26 times more volatile than Tractor Supply. It trades about 0.26 of its potential returns per unit of risk. Tractor Supply is currently generating about 0.14 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 580.00 from holding General Motors or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Tractor Supply
Performance |
| Timeline |
| General Motors |
| Tractor Supply |
GM and Tractor Supply Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tractor Supply
The main advantage of trading using opposite GM and Tractor Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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. AutoZone | Tractor Supply vs. Advance Auto Parts | Tractor Supply vs. Genuine Parts Co | Tractor Supply vs. Five Below |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |