Correlation Between Tractor Supply and EBay
Can any of the company-specific risk be diversified away by investing in both Tractor Supply and EBay 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 EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tractor Supply and eBay Inc, you can compare the effects of market volatilities on Tractor Supply and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tractor Supply and EBay.
Diversification Opportunities for Tractor Supply and EBay
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tractor and EBay is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Tractor Supply i.e., Tractor Supply and EBay go up and down completely randomly.
Pair Corralation between Tractor Supply and EBay
Assuming the 90 days horizon Tractor Supply is expected to generate 1.52 times less return on investment than EBay. In addition to that, Tractor Supply is 1.06 times more volatile than eBay Inc. It trades about 0.04 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.06 per unit of volatility. If you would invest 3,805 in eBay Inc on September 24, 2024 and sell it today you would earn a total of 2,301 from holding eBay Inc or generate 60.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tractor Supply vs. eBay Inc
Performance |
| Timeline |
| Tractor Supply |
| eBay Inc |
Tractor Supply and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tractor Supply and EBay
The main advantage of trading using opposite Tractor Supply and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tractor Supply position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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