Correlation Between Walmart and Dingdong ADR

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

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

Diversification Opportunities for Walmart and Dingdong ADR

-0.29

Correlation Coefficient

Walmart  Dingdong ADR

Very good diversification

The 3 months correlation between Walmart and Dingdong is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR 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 Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Walmart i.e., Walmart and Dingdong ADR go up and down completely randomly.

Pair Corralation between Walmart and Dingdong ADR

Considering the 90-day investment horizon Walmart is expected to generate 1.52 times less return on investment than Dingdong ADR. But when comparing it to its historical volatility, Walmart is 1.19 times less risky than Dingdong ADR. It trades about 0.01 of its potential returns per unit of risk. Dingdong ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  349.00  in Dingdong ADR on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Dingdong ADR or generate 0.0% return on investment over 90 days.

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

Walmart  vs.  Dingdong ADR

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dingdong ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dingdong ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Walmart and Dingdong ADR

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

The idea behind Walmart and Dingdong ADR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.