Correlation Between Walmart and S1NP34

Can any of the company-specific risk be diversified away by investing in both Walmart and S1NP34 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 S1NP34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and S1NP34, you can compare the effects of market volatilities on Walmart and S1NP34 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 S1NP34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and S1NP34.

Diversification Opportunities for Walmart and S1NP34

0.83

Correlation Coefficient

Walmart  S1NP34

Very poor diversification

The 3 months correlation between Walmart and S1NP34 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and S1NP34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S1NP34 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 are associated (or correlated) with S1NP34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S1NP34 has no effect on the direction of Walmart i.e., Walmart and S1NP34 go up and down completely randomly.

Pair Corralation between Walmart and S1NP34

Assuming the 90 days trading horizon Walmart is expected to generate 0.52 times more return on investment than S1NP34. However, Walmart is 1.92 times less risky than S1NP34. It trades about 0.23 of its potential returns per unit of risk. S1NP34 is currently generating about -0.09 per unit of risk. If you would invest  3,197  in Walmart on September 22, 2024 and sell it today you would earn a total of  289.00  from holding Walmart or generate 9.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Walmart  vs.  S1NP34

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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.

S1NP34

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in S1NP34 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, S1NP34 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and S1NP34

The main advantage of trading using opposite Walmart and S1NP34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, S1NP34 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 S1NP34 will offset losses from the drop in S1NP34's long position.

The idea behind Walmart and S1NP34 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.