Correlation Between WALMART and Tandy Leather

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

By analyzing existing cross correlation between WALMART INC and Tandy Leather Factory, you can compare the effects of market volatilities on WALMART and Tandy Leather 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 Tandy Leather. Check out your portfolio center. Please also check ongoing floating volatility patterns of WALMART and Tandy Leather.

Diversification Opportunities for WALMART and Tandy Leather

0.46

Correlation Coefficient

WALMART  Tandy Leather

Very weak diversification

The 3 months correlation between WALMART and Tandy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding WALMART INC and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory 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 INC are associated (or correlated) with Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of WALMART i.e., WALMART and Tandy Leather go up and down completely randomly.

Pair Corralation between WALMART and Tandy Leather

Assuming the 90 days trading horizon WALMART INC is expected to generate 0.12 times more return on investment than Tandy Leather. However, WALMART INC is 8.03 times less risky than Tandy Leather. It trades about -0.09 of its potential returns per unit of risk. Tandy Leather Factory is currently generating about -0.07 per unit of risk. If you would invest  9,808  in WALMART INC on December 30, 2024 and sell it today you would lose (177.00) from holding WALMART INC or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

WALMART INC  vs.  Tandy Leather Factory

WALMART INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days WALMART INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WALMART is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tandy Leather Factory

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with WALMART and Tandy Leather

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

The idea behind WALMART INC and Tandy Leather Factory 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.