Correlation Between Walmart and FAR

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

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

Diversification Opportunities for Walmart and FAR

-0.38

Correlation Coefficient

Walmart  FAR

Very good diversification

The 3 months correlation between Walmart and FAR is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and FAR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAR Limited 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 FAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAR Limited has no effect on the direction of Walmart i.e., Walmart and FAR go up and down completely randomly.

Pair Corralation between Walmart and FAR

Considering the 90-day investment horizon Walmart is expected to generate 0.74 times more return on investment than FAR. However, Walmart is 1.36 times less risky than FAR. It trades about 0.26 of its potential returns per unit of risk. FAR Limited is currently generating about -0.07 per unit of risk. If you would invest  7,717  in Walmart on August 31, 2024 and sell it today you would earn a total of  1,471  from holding Walmart or generate 19.06% return on investment over 90 days.

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

Walmart  vs.  FAR Limited

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 fragile primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

FAR Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FAR Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FAR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and FAR

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

The idea behind Walmart and FAR Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.