Correlation Between Walmart and Travel Leisure

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

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

Diversification Opportunities for Walmart and Travel Leisure

0.0

Correlation Coefficient

Walmart  Travel Leisure

Pay attention - limited upside

The 3 months correlation between Walmart and Travel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Travel Leisure Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travel Leisure 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 Travel Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travel Leisure has no effect on the direction of Walmart i.e., Walmart and Travel Leisure go up and down completely randomly.

Pair Corralation between Walmart and Travel Leisure

Assuming the 90 days trading horizon Walmart is expected to generate 7.27 times less return on investment than Travel Leisure. But when comparing it to its historical volatility, Walmart is 54.54 times less risky than Travel Leisure. It trades about 0.23 of its potential returns per unit of risk. Travel Leisure Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,765  in Travel Leisure Co on October 10, 2024 and sell it today you would earn a total of  50.00  from holding Travel Leisure Co or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Walmart  vs.  Travel Leisure Co

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Travel Leisure

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Travel Leisure Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Travel Leisure 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 Travel Leisure

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

The idea behind Walmart and Travel Leisure Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.