Correlation Between Walmart and Federal Realty

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

By analyzing existing cross correlation between Walmart and Federal Realty Investment, you can compare the effects of market volatilities on Walmart and Federal Realty 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 Federal Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Federal Realty.

Diversification Opportunities for Walmart and Federal Realty

-0.39

Correlation Coefficient

Walmart  Federal Realty

Very good diversification

The 3 months correlation between Walmart and Federal is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment 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 Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Walmart i.e., Walmart and Federal Realty go up and down completely randomly.

Pair Corralation between Walmart and Federal Realty

Assuming the 90 days trading horizon Walmart is expected to generate 0.05 times more return on investment than Federal Realty. However, Walmart is 22.22 times less risky than Federal Realty. It trades about 0.13 of its potential returns per unit of risk. Federal Realty Investment is currently generating about -0.08 per unit of risk. If you would invest  5,939  in Walmart on October 11, 2024 and sell it today you would earn a total of  21.00  from holding Walmart or generate 0.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Walmart  vs.  Federal Realty Investment

Walmart

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Federal Realty Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Federal Realty is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and Federal Realty

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

The idea behind Walmart and Federal Realty Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.