Correlation Between Walmart and Morgan Stanley

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

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

Diversification Opportunities for Walmart and Morgan Stanley

-0.51

Correlation Coefficient

Walmart  Morgan Stanley

Excellent diversification

The 3 months correlation between Walmart and Morgan is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley ETF has no effect on the direction of Walmart i.e., Walmart and Morgan Stanley go up and down completely randomly.

Pair Corralation between Walmart and Morgan Stanley

Considering the 90-day investment horizon Walmart is expected to generate 2.07 times more return on investment than Morgan Stanley. However, Walmart is 2.07 times more volatile than Morgan Stanley ETF. It trades about 0.49 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.07 per unit of risk. If you would invest  8,421  in Walmart on September 12, 2024 and sell it today you would earn a total of  1,075  from holding Walmart or generate 12.77% return on investment over 90 days.

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

Walmart  vs.  Morgan Stanley ETF

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walmart and Morgan Stanley

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

The idea behind Walmart and Morgan Stanley ETF 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.