Correlation Between Walmart and Baron Capital

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

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

Diversification Opportunities for Walmart and Baron Capital

-0.1

Correlation Coefficient

Walmart  Baron Capital

Good diversification

The 3 months correlation between Walmart and Baron is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Baron Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Capital 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 Baron Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Capital has no effect on the direction of Walmart i.e., Walmart and Baron Capital go up and down completely randomly.

Pair Corralation between Walmart and Baron Capital

Considering the 90-day investment horizon Walmart is expected to under-perform the Baron Capital. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 13.39 times less risky than Baron Capital. The stock trades about -0.04 of its potential returns per unit of risk. The Baron Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Baron Capital on December 28, 2024 and sell it today you would earn a total of  0.01  from holding Baron Capital or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Walmart  vs.  Baron Capital

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. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Baron Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Baron Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Baron Capital

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

The idea behind Walmart and Baron Capital 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.