Correlation Between Walmart and VictoryShares 500

Can any of the company-specific risk be diversified away by investing in both Walmart and VictoryShares 500 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 VictoryShares 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and VictoryShares 500 Enhanced, you can compare the effects of market volatilities on Walmart and VictoryShares 500 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 VictoryShares 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and VictoryShares 500.

Diversification Opportunities for Walmart and VictoryShares 500

0.82

Correlation Coefficient

Walmart  VictoryShares 500

Very poor diversification

The 3 months correlation between Walmart and VictoryShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and VictoryShares 500 Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 500 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 VictoryShares 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares 500 has no effect on the direction of Walmart i.e., Walmart and VictoryShares 500 go up and down completely randomly.

Pair Corralation between Walmart and VictoryShares 500

Considering the 90-day investment horizon Walmart is expected to under-perform the VictoryShares 500. In addition to that, Walmart is 2.14 times more volatile than VictoryShares 500 Enhanced. It trades about -0.05 of its total potential returns per unit of risk. VictoryShares 500 Enhanced is currently generating about -0.02 per unit of volatility. If you would invest  6,880  in VictoryShares 500 Enhanced on December 30, 2024 and sell it today you would lose (87.00) from holding VictoryShares 500 Enhanced or give up 1.26% of portfolio value over 90 days.

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

Walmart  vs.  VictoryShares 500 Enhanced

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

VictoryShares 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares 500 Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, VictoryShares 500 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walmart and VictoryShares 500

The main advantage of trading using opposite Walmart and VictoryShares 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, VictoryShares 500 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 VictoryShares 500 will offset losses from the drop in VictoryShares 500's long position.

The idea behind Walmart and VictoryShares 500 Enhanced 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.