Correlation Between Tractor Supply and Asbury Automotive

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

By analyzing existing cross correlation between Tractor Supply and Asbury Automotive Group, you can compare the effects of market volatilities on Tractor Supply and Asbury Automotive 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 Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tractor Supply and Asbury Automotive.

Diversification Opportunities for Tractor Supply and Asbury Automotive

-0.07

Correlation Coefficient

Tractor Supply  Asbury Automotive

Good diversification

The 3 months correlation between Tractor and Asbury is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive 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 Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of Tractor Supply i.e., Tractor Supply and Asbury Automotive go up and down completely randomly.

Pair Corralation between Tractor Supply and Asbury Automotive

Given the investment horizon of 90 days Tractor Supply is expected to generate 1.77 times less return on investment than Asbury Automotive. But when comparing it to its historical volatility, Tractor Supply is 1.32 times less risky than Asbury Automotive. It trades about 0.16 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  23,698  in Asbury Automotive Group on September 3, 2024 and sell it today you would earn a total of  2,285  from holding Asbury Automotive Group or generate 9.64% return on investment over 90 days.

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

Tractor Supply  vs.  Asbury Automotive Group

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 very unfluctuating fundamental indicators, Tractor Supply may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Asbury Automotive

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tractor Supply and Asbury Automotive

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

The idea behind Tractor Supply and Asbury Automotive Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.