Correlation Between Walmart and VanEck Natural

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

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

Diversification Opportunities for Walmart and VanEck Natural

-0.74

Correlation Coefficient

Walmart  VanEck Natural

Pay attention - limited upside

The 3 months correlation between Walmart and VanEck is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and VanEck Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Natural Resources 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 VanEck Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Natural Resources has no effect on the direction of Walmart i.e., Walmart and VanEck Natural go up and down completely randomly.

Pair Corralation between Walmart and VanEck Natural

Considering the 90-day investment horizon Walmart is expected to generate 1.28 times more return on investment than VanEck Natural. However, Walmart is 1.28 times more volatile than VanEck Natural Resources. It trades about 0.21 of its potential returns per unit of risk. VanEck Natural Resources is currently generating about -0.04 per unit of risk. If you would invest  6,006  in Walmart on September 20, 2024 and sell it today you would earn a total of  3,334  from holding Walmart or generate 55.51% return on investment over 90 days.

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

Walmart  vs.  VanEck Natural Resources

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) 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.

VanEck Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Walmart and VanEck Natural

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

The idea behind Walmart and VanEck Natural Resources 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.