Correlation Between Walmart and DRI Healthcare

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

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

Diversification Opportunities for Walmart and DRI Healthcare

-0.85

Correlation Coefficient

Walmart  DRI Healthcare

Pay attention - limited upside

The 3 months correlation between Walmart and DRI is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and DRI Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRI Healthcare Trust 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 CDR are associated (or correlated) with DRI Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRI Healthcare Trust has no effect on the direction of Walmart i.e., Walmart and DRI Healthcare go up and down completely randomly.

Pair Corralation between Walmart and DRI Healthcare

Assuming the 90 days trading horizon Walmart Inc CDR is expected to under-perform the DRI Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Walmart Inc CDR is 2.03 times less risky than DRI Healthcare. The stock trades about -0.16 of its potential returns per unit of risk. The DRI Healthcare Trust is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,214  in DRI Healthcare Trust on October 10, 2024 and sell it today you would earn a total of  36.00  from holding DRI Healthcare Trust or generate 2.97% return on investment over 90 days.

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

Walmart Inc CDR  vs.  DRI Healthcare Trust

Walmart Inc CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

DRI Healthcare Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRI Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walmart and DRI Healthcare

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

The idea behind Walmart Inc CDR and DRI Healthcare Trust 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..