Correlation Between Tractor Supply and Vipshop Holdings

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Can any of the company-specific risk be diversified away by investing in both Tractor Supply and Vipshop Holdings 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 Vipshop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tractor Supply and Vipshop Holdings Limited, you can compare the effects of market volatilities on Tractor Supply and Vipshop Holdings 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 Vipshop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tractor Supply and Vipshop Holdings.

Diversification Opportunities for Tractor Supply and Vipshop Holdings

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Tractor and Vipshop is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings 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 Vipshop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vipshop Holdings has no effect on the direction of Tractor Supply i.e., Tractor Supply and Vipshop Holdings go up and down completely randomly.

Pair Corralation between Tractor Supply and Vipshop Holdings

Given the investment horizon of 90 days Tractor Supply is expected to generate 0.31 times more return on investment than Vipshop Holdings. However, Tractor Supply is 3.21 times less risky than Vipshop Holdings. It trades about 0.14 of its potential returns per unit of risk. Vipshop Holdings Limited is currently generating about -0.01 per unit of risk. If you would invest  25,120  in Tractor Supply on December 29, 2023 and sell it today you would earn a total of  924.00  from holding Tractor Supply or generate 3.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Tractor Supply  vs.  Vipshop Holdings Limited

 Performance 
       Timeline  
Tractor Supply 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Tractor Supply are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Tractor Supply displayed solid returns over the last few months and may actually be approaching a breakup point.
Vipshop Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Vipshop Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vipshop Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Tractor Supply and Vipshop Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tractor Supply and Vipshop Holdings

The main advantage of trading using opposite Tractor Supply and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tractor Supply position performs unexpectedly, Vipshop Holdings 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 Vipshop Holdings will offset losses from the drop in Vipshop Holdings' long position.
The idea behind Tractor Supply and Vipshop Holdings Limited 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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