Correlation Between Walmart and Franklin Liberty

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

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

Diversification Opportunities for Walmart and Franklin Liberty

-0.15

Correlation Coefficient

Walmart  Franklin Liberty

Good diversification

The 3 months correlation between Walmart and Franklin is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Franklin Liberty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Inv 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 Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Inv has no effect on the direction of Walmart i.e., Walmart and Franklin Liberty go up and down completely randomly.

Pair Corralation between Walmart and Franklin Liberty

Considering the 90-day investment horizon Walmart is expected to under-perform the Franklin Liberty. In addition to that, Walmart is 5.26 times more volatile than Franklin Liberty Investment. It trades about -0.05 of its total potential returns per unit of risk. Franklin Liberty Investment is currently generating about 0.1 per unit of volatility. If you would invest  2,097  in Franklin Liberty Investment on December 29, 2024 and sell it today you would earn a total of  41.00  from holding Franklin Liberty Investment or generate 1.96% return on investment over 90 days.

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

Walmart  vs.  Franklin Liberty Investment

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.

Franklin Liberty Inv

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Franklin Liberty 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 Franklin Liberty

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

The idea behind Walmart and Franklin Liberty Investment 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 Transaction History module to view history of all your transactions and understand their impact on performance.