Correlation Between COMMERCIAL VEHICLE and Walmart

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

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

Diversification Opportunities for COMMERCIAL VEHICLE and Walmart

-0.88

Correlation Coefficient

COMMERCIAL VEHICLE  Walmart

Pay attention - limited upside

The 3 months correlation between COMMERCIAL and Walmart is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and Walmart go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and Walmart

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the Walmart. In addition to that, COMMERCIAL VEHICLE is 2.85 times more volatile than Walmart. It trades about -0.22 of its total potential returns per unit of risk. Walmart is currently generating about 0.04 per unit of volatility. If you would invest  8,502  in Walmart on September 25, 2024 and sell it today you would earn a total of  85.00  from holding Walmart or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

COMMERCIAL VEHICLE  vs.  Walmart

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMMERCIAL VEHICLE and Walmart

The main advantage of trading using opposite COMMERCIAL VEHICLE and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.