Correlation Between Walmart and AIRBNB INC

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

By analyzing existing cross correlation between Walmart and AIRBNB INC DL 01, you can compare the effects of market volatilities on Walmart and AIRBNB INC 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 AIRBNB INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and AIRBNB INC.

Diversification Opportunities for Walmart and AIRBNB INC

0.79

Correlation Coefficient

Walmart  AIRBNB INC

Poor diversification

The 3 months correlation between Walmart and AIRBNB is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and AIRBNB INC DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIRBNB INC DL 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 AIRBNB INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIRBNB INC DL has no effect on the direction of Walmart i.e., Walmart and AIRBNB INC go up and down completely randomly.

Pair Corralation between Walmart and AIRBNB INC

Assuming the 90 days trading horizon Walmart is expected to generate 1.13 times less return on investment than AIRBNB INC. But when comparing it to its historical volatility, Walmart is 1.88 times less risky than AIRBNB INC. It trades about 0.31 of its potential returns per unit of risk. AIRBNB INC DL 01 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,352  in AIRBNB INC DL 01 on September 3, 2024 and sell it today you would earn a total of  2,710  from holding AIRBNB INC DL 01 or generate 26.18% return on investment over 90 days.

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

Walmart  vs.  AIRBNB INC DL 01

Walmart

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

AIRBNB INC DL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIRBNB INC DL 01 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIRBNB INC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and AIRBNB INC

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

The idea behind Walmart and AIRBNB INC DL 01 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.