Correlation Between Walmart and First Trust

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

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

Diversification Opportunities for Walmart and First Trust

0.25

Correlation Coefficient

Walmart  First Trust

Modest diversification

The 3 months correlation between Walmart and First is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and First Trust Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Value 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Value has no effect on the direction of Walmart i.e., Walmart and First Trust go up and down completely randomly.

Pair Corralation between Walmart and First Trust

Considering the 90-day investment horizon Walmart is expected to under-perform the First Trust. In addition to that, Walmart is 2.4 times more volatile than First Trust Value. It trades about -0.04 of its total potential returns per unit of risk. First Trust Value is currently generating about 0.06 per unit of volatility. If you would invest  4,348  in First Trust Value on December 28, 2024 and sell it today you would earn a total of  102.00  from holding First Trust Value or generate 2.35% return on investment over 90 days.

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

Walmart  vs.  First Trust Value

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 Trust Value

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Value are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walmart and First Trust

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

The idea behind Walmart and First Trust Value 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.