Correlation Between Tractor Supply and Bristol Myers

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

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

Diversification Opportunities for Tractor Supply and Bristol Myers

-0.24

Correlation Coefficient

Tractor Supply  Bristol Myers

Very good diversification

The 3 months correlation between Tractor and Bristol is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb 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 Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Tractor Supply i.e., Tractor Supply and Bristol Myers go up and down completely randomly.

Pair Corralation between Tractor Supply and Bristol Myers

Given the investment horizon of 90 days Tractor Supply is expected to under-perform the Bristol Myers. But the stock apears to be less risky and, when comparing its historical volatility, Tractor Supply is 2.11 times less risky than Bristol Myers. The stock trades about -0.03 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  73,550  in Bristol Myers Squibb on September 25, 2024 and sell it today you would earn a total of  26,339  from holding Bristol Myers Squibb or generate 35.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Tractor Supply  vs.  Bristol Myers Squibb

Tractor Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tractor Supply has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Tractor Supply is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bristol Myers Squibb

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol Myers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tractor Supply and Bristol Myers

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

The idea behind Tractor Supply and Bristol Myers Squibb 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.