Correlation Between Avanos Medical and Walmart

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

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

Diversification Opportunities for Avanos Medical and Walmart

0.76

Correlation Coefficient

Avanos Medical  Walmart

Poor diversification

The 3 months correlation between Avanos and Walmart is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Avanos Medical 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 Avanos Medical are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Avanos Medical i.e., Avanos Medical and Walmart go up and down completely randomly.

Pair Corralation between Avanos Medical and Walmart

Assuming the 90 days trading horizon Avanos Medical is expected to under-perform the Walmart. In addition to that, Avanos Medical is 1.15 times more volatile than Walmart. It trades about -0.1 of its total potential returns per unit of risk. Walmart is currently generating about -0.07 per unit of volatility. If you would invest  8,728  in Walmart on December 24, 2024 and sell it today you would lose (664.00) from holding Walmart or give up 7.61% of portfolio value over 90 days.

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

Avanos Medical  vs.  Walmart

Avanos Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Avanos Medical and Walmart

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

The idea behind Avanos Medical and Walmart 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.