Correlation Between Walmart and Willow Biosciences

Can any of the company-specific risk be diversified away by investing in both Walmart and Willow Biosciences 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 Willow Biosciences 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 Willow Biosciences, you can compare the effects of market volatilities on Walmart and Willow Biosciences 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 Willow Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Willow Biosciences.

Diversification Opportunities for Walmart and Willow Biosciences

-0.76

Correlation Coefficient

Walmart  Willow Biosciences

Pay attention - limited upside

The 3 months correlation between Walmart and Willow is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Willow Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willow Biosciences 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 Willow Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willow Biosciences has no effect on the direction of Walmart i.e., Walmart and Willow Biosciences go up and down completely randomly.

Pair Corralation between Walmart and Willow Biosciences

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.18 times more return on investment than Willow Biosciences. However, Walmart Inc CDR is 5.52 times less risky than Willow Biosciences. It trades about 0.2 of its potential returns per unit of risk. Willow Biosciences is currently generating about -0.04 per unit of risk. If you would invest  3,498  in Walmart Inc CDR on October 9, 2024 and sell it today you would earn a total of  464.00  from holding Walmart Inc CDR or generate 13.26% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Willow Biosciences

Walmart Inc CDR

Risk-Adjusted Performance

15 of 100

Solid

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 unfluctuating basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Willow Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Walmart and Willow Biosciences

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

The idea behind Walmart Inc CDR and Willow Biosciences 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..