Correlation Between Walmart and Fidelity Momentum

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

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

Diversification Opportunities for Walmart and Fidelity Momentum

0.89

Correlation Coefficient

Walmart  Fidelity Momentum

Very poor diversification

The 3 months correlation between Walmart and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Fidelity Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum Factor 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 Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum Factor has no effect on the direction of Walmart i.e., Walmart and Fidelity Momentum go up and down completely randomly.

Pair Corralation between Walmart and Fidelity Momentum

Considering the 90-day investment horizon Walmart is expected to generate 1.65 times more return on investment than Fidelity Momentum. However, Walmart is 1.65 times more volatile than Fidelity Momentum Factor. It trades about 0.55 of its potential returns per unit of risk. Fidelity Momentum Factor is currently generating about 0.24 per unit of risk. If you would invest  8,389  in Walmart on September 18, 2024 and sell it today you would earn a total of  1,098  from holding Walmart or generate 13.09% return on investment over 90 days.

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

Walmart  vs.  Fidelity Momentum Factor

Walmart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) 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.

Fidelity Momentum Factor

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Momentum Factor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Fidelity Momentum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Fidelity Momentum

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

The idea behind Walmart and Fidelity Momentum Factor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..