Correlation Between Kaufman Broad and TRACTOR SUPPLY

Can any of the company-specific risk be diversified away by investing in both Kaufman Broad 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 Kaufman Broad and TRACTOR SUPPLY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kaufman Broad SA and TRACTOR SUPPLY, you can compare the effects of market volatilities on Kaufman Broad 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 Kaufman Broad with a short position of TRACTOR SUPPLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaufman Broad and TRACTOR SUPPLY.

Diversification Opportunities for Kaufman Broad and TRACTOR SUPPLY

-0.01

Correlation Coefficient

Kaufman Broad  TRACTOR SUPPLY

Good diversification

The 3 months correlation between Kaufman and TRACTOR is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kaufman Broad SA and TRACTOR SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACTOR SUPPLY and Kaufman Broad 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 Kaufman Broad SA 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 Kaufman Broad i.e., Kaufman Broad and TRACTOR SUPPLY go up and down completely randomly.

Pair Corralation between Kaufman Broad and TRACTOR SUPPLY

Assuming the 90 days horizon Kaufman Broad SA is expected to under-perform the TRACTOR SUPPLY. But the stock apears to be less risky and, when comparing its historical volatility, Kaufman Broad SA is 1.12 times less risky than TRACTOR SUPPLY. The stock trades about -0.13 of its potential returns per unit of risk. The TRACTOR SUPPLY is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  25,980  in TRACTOR SUPPLY on September 20, 2024 and sell it today you would lose (565.00) from holding TRACTOR SUPPLY or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Kaufman Broad SA  vs.  TRACTOR SUPPLY

Kaufman Broad SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaufman Broad SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kaufman Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TRACTOR SUPPLY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TRACTOR SUPPLY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TRACTOR SUPPLY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kaufman Broad and TRACTOR SUPPLY

The main advantage of trading using opposite Kaufman Broad and TRACTOR SUPPLY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaufman Broad 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 Kaufman Broad SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.