Correlation Between Walmart and HEALTHSTREAM (HL5SG)

Can any of the company-specific risk be diversified away by investing in both Walmart and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and HEALTHSTREAM, you can compare the effects of market volatilities on Walmart and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and HEALTHSTREAM (HL5SG).

Diversification Opportunities for Walmart and HEALTHSTREAM (HL5SG)

0.91

Correlation Coefficient

Walmart  HEALTHSTREAM (HL5SG)

Almost no diversification

The 3 months correlation between Walmart and HEALTHSTREAM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and HEALTHSTREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHSTREAM (HL5SG) has no effect on the direction of Walmart i.e., Walmart and HEALTHSTREAM (HL5SG) go up and down completely randomly.

Pair Corralation between Walmart and HEALTHSTREAM (HL5SG)

Assuming the 90 days horizon Walmart is expected to under-perform the HEALTHSTREAM (HL5SG). In addition to that, Walmart is 1.27 times more volatile than HEALTHSTREAM. It trades about -0.06 of its total potential returns per unit of risk. HEALTHSTREAM is currently generating about -0.06 per unit of volatility. If you would invest  3,057  in HEALTHSTREAM on December 25, 2024 and sell it today you would lose (157.00) from holding HEALTHSTREAM or give up 5.14% of portfolio value over 90 days.

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

Walmart  vs.  HEALTHSTREAM

Walmart

Risk-Adjusted Performance

Very Weak

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

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHSTREAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HEALTHSTREAM (HL5SG) is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and HEALTHSTREAM (HL5SG)

The main advantage of trading using opposite Walmart and HEALTHSTREAM (HL5SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) will offset losses from the drop in HEALTHSTREAM (HL5SG)'s long position.

The idea behind Walmart and HEALTHSTREAM 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.