Correlation Between Walmart and Buffalo Growth

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

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

Diversification Opportunities for Walmart and Buffalo Growth

0.74

Correlation Coefficient

Walmart  Buffalo Growth

Poor diversification

The 3 months correlation between Walmart and Buffalo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Buffalo Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo Growth 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 Buffalo Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo Growth has no effect on the direction of Walmart i.e., Walmart and Buffalo Growth go up and down completely randomly.

Pair Corralation between Walmart and Buffalo Growth

Considering the 90-day investment horizon Walmart is expected to generate 1.39 times more return on investment than Buffalo Growth. However, Walmart is 1.39 times more volatile than Buffalo Growth. It trades about -0.04 of its potential returns per unit of risk. Buffalo Growth is currently generating about -0.09 per unit of risk. If you would invest  9,032  in Walmart on December 29, 2024 and sell it today you would lose (469.00) from holding Walmart or give up 5.19% of portfolio value over 90 days.

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

Walmart  vs.  Buffalo Growth

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.

Buffalo Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buffalo Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Walmart and Buffalo Growth

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

The idea behind Walmart and Buffalo Growth 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.