Correlation Between Walmart and Gen Digital

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

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

Diversification Opportunities for Walmart and Gen Digital

0.84

Correlation Coefficient

Walmart  Gen Digital

Very poor diversification

The 3 months correlation between Walmart and Gen is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Gen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen Digital 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 Gen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen Digital has no effect on the direction of Walmart i.e., Walmart and Gen Digital go up and down completely randomly.

Pair Corralation between Walmart and Gen Digital

Assuming the 90 days trading horizon Walmart is expected to generate 4.97 times more return on investment than Gen Digital. However, Walmart is 4.97 times more volatile than Gen Digital. It trades about 0.05 of its potential returns per unit of risk. Gen Digital is currently generating about 0.05 per unit of risk. If you would invest  1,490  in Walmart on October 4, 2024 and sell it today you would earn a total of  1,977  from holding Walmart or generate 132.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.59%
Values	Daily Returns

Walmart  vs.  Gen Digital

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.

Gen Digital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Gen Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Gen Digital

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

The idea behind Walmart and Gen Digital 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.