Correlation Between Vanguard 500 and Walmart

Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 Vanguard 500 and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard 500 Index and Walmart, you can compare the effects of market volatilities on Vanguard 500 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 Vanguard 500 with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Walmart.

Diversification Opportunities for Vanguard 500 and Walmart

0.82

Correlation Coefficient

Vanguard 500  Walmart

Very poor diversification

The 3 months correlation between VANGUARD and Walmart is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Vanguard 500 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 Vanguard 500 Index 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 Vanguard 500 i.e., Vanguard 500 and Walmart go up and down completely randomly.

Pair Corralation between Vanguard 500 and Walmart

Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.77 times more return on investment than Walmart. However, Vanguard 500 Index is 1.3 times less risky than Walmart. It trades about -0.14 of its potential returns per unit of risk. Walmart is currently generating about -0.14 per unit of risk. If you would invest  55,784  in Vanguard 500 Index on October 4, 2024 and sell it today you would lose (1,500) from holding Vanguard 500 Index or give up 2.69% of portfolio value over 90 days.

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

Vanguard 500 Index  vs.  Walmart

Vanguard 500 Index

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard 500 Index are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walmart

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard 500 and Walmart

The main advantage of trading using opposite Vanguard 500 and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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 Vanguard 500 Index 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.