Correlation Between Tractor Supply and AutoZone

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

Diversification Opportunities for Tractor Supply and AutoZone

  Correlation Coefficient

Almost no diversification

The 3 months correlation between Tractor and AutoZone is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tractor Supply and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Tractor Supply i.e., Tractor Supply and AutoZone go up and down completely randomly.

Pair Corralation between Tractor Supply and AutoZone

Given the investment horizon of 90 days Tractor Supply is expected to generate 1.52 times more return on investment than AutoZone. However, Tractor Supply is 1.52 times more volatile than AutoZone. It trades about 0.06 of its potential returns per unit of risk. AutoZone is currently generating about 0.03 per unit of risk. If you would invest  21,959  in Tractor Supply on September 2, 2022 and sell it today you would earn a total of  504.00  from holding Tractor Supply or generate 2.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
ValuesDaily Returns

Tractor Supply  vs.  AutoZone

 Performance (%) 
Tractor Supply 
Tractor Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Tractor Supply are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish fundamental indicators, Tractor Supply disclosed solid returns over the last few months and may actually be approaching a breakup point.

Tractor Price Channel

AutoZone Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, AutoZone disclosed solid returns over the last few months and may actually be approaching a breakup point.

AutoZone Price Channel

Tractor Supply and AutoZone Volatility Contrast

   Predicted Return Density   

Pair Trading with Tractor Supply and AutoZone

The main advantage of trading using opposite Tractor Supply and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tractor Supply position performs unexpectedly, AutoZone 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 AutoZone will offset losses from the drop in AutoZone's long position.
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The idea behind Tractor Supply and AutoZone 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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