Correlation Between Palantir Technologies and Walmart

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

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

Diversification Opportunities for Palantir Technologies and Walmart

0.96

Correlation Coefficient

Palantir Technologies  Walmart

Almost no diversification

The 3 months correlation between Palantir and Walmart is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Walmart go up and down completely randomly.

Pair Corralation between Palantir Technologies and Walmart

Assuming the 90 days trading horizon Palantir Technologies is expected to generate 0.42 times more return on investment than Walmart. However, Palantir Technologies is 2.36 times less risky than Walmart. It trades about 0.14 of its potential returns per unit of risk. Walmart is currently generating about 0.05 per unit of risk. If you would invest  1,183  in Palantir Technologies on October 4, 2024 and sell it today you would earn a total of  14,267  from holding Palantir Technologies or generate 1206.0% return on investment over 90 days.

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

Palantir Technologies  vs.  Walmart

Palantir Technologies

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palantir Technologies and Walmart

The main advantage of trading using opposite Palantir Technologies and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.