Correlation Between Walmart and Tractor Supply

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

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

Diversification Opportunities for Walmart and Tractor Supply

-0.08

Correlation Coefficient

Walmart  Tractor Supply

Good diversification

The 3 months correlation between Walmart and Tractor is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply and Walmart 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 Walmart 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 Walmart i.e., Walmart and Tractor Supply go up and down completely randomly.

Pair Corralation between Walmart and Tractor Supply

Assuming the 90 days trading horizon Walmart is expected to under-perform the Tractor Supply. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 1.19 times less risky than Tractor Supply. The stock trades about -0.01 of its potential returns per unit of risk. The Tractor Supply is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,533  in Tractor Supply on April 24, 2025 and sell it today you would earn a total of  295.00  from holding Tractor Supply or generate 19.24% return on investment over 90 days.

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

Walmart  vs.  Tractor Supply

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Walmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tractor Supply

Risk-Adjusted Performance

Good

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

Pair Trading with Walmart and Tractor Supply

The main advantage of trading using opposite Walmart and Tractor Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.