Correlation Between Walmart and Fidelity Covington

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

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

Diversification Opportunities for Walmart and Fidelity Covington

0.79

Correlation Coefficient

Walmart  Fidelity Covington

Poor diversification

The 3 months correlation between Walmart and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Walmart i.e., Walmart and Fidelity Covington go up and down completely randomly.

Pair Corralation between Walmart and Fidelity Covington

Considering the 90-day investment horizon Walmart is expected to generate 1.26 times more return on investment than Fidelity Covington. However, Walmart is 1.26 times more volatile than Fidelity Covington Trust. It trades about 0.23 of its potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.12 per unit of risk. If you would invest  8,038  in Walmart on September 16, 2024 and sell it today you would earn a total of  1,387  from holding Walmart or generate 17.26% return on investment over 90 days.

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

Walmart  vs.  Fidelity Covington Trust

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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 Covington Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fidelity Covington 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 Fidelity Covington

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

The idea behind Walmart and Fidelity Covington Trust 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.