Correlation Between Wal-Mart and FORWARD AIR

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

By analyzing existing cross correlation between Wal Mart de Mxico and FORWARD AIR P, you can compare the effects of market volatilities on Wal-Mart and FORWARD AIR 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 Wal-Mart with a short position of FORWARD AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal-Mart and FORWARD AIR.

Diversification Opportunities for Wal-Mart and FORWARD AIR

0.21

Correlation Coefficient

Wal-Mart  FORWARD AIR

Modest diversification

The 3 months correlation between Wal-Mart and FORWARD is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P and Wal-Mart 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 Wal Mart de Mxico are associated (or correlated) with FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of Wal-Mart i.e., Wal-Mart and FORWARD AIR go up and down completely randomly.

Pair Corralation between Wal-Mart and FORWARD AIR

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to generate 1.06 times more return on investment than FORWARD AIR. However, Wal-Mart is 1.06 times more volatile than FORWARD AIR P. It trades about 0.06 of its potential returns per unit of risk. FORWARD AIR P is currently generating about -0.03 per unit of risk. If you would invest  98.00  in Wal Mart de Mxico on September 5, 2024 and sell it today you would earn a total of  160.00  from holding Wal Mart de Mxico or generate 163.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Wal Mart de Mxico  vs.  FORWARD AIR P

Wal Mart de

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de Mxico are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wal-Mart reported solid returns over the last few months and may actually be approaching a breakup point.

FORWARD AIR P

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FORWARD AIR P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FORWARD AIR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wal-Mart and FORWARD AIR

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

The idea behind Wal Mart de Mxico and FORWARD AIR P 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.