Correlation Between Walmart and First Northern

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

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

Diversification Opportunities for Walmart and First Northern

-0.56

Correlation Coefficient

Walmart  First Northern

Excellent diversification

The 3 months correlation between Walmart and First is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and First Northern Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northern Community 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 First Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northern Community has no effect on the direction of Walmart i.e., Walmart and First Northern go up and down completely randomly.

Pair Corralation between Walmart and First Northern

Considering the 90-day investment horizon Walmart is expected to under-perform the First Northern. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 1.51 times less risky than First Northern. The stock trades about -0.04 of its potential returns per unit of risk. The First Northern Community is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  995.00  in First Northern Community on December 28, 2024 and sell it today you would earn a total of  24.00  from holding First Northern Community or generate 2.41% return on investment over 90 days.

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

Walmart  vs.  First Northern Community

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

First Northern Community

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Northern Community are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Northern is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walmart and First Northern

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

The idea behind Walmart and First Northern Community 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.