Correlation Between Walmart and ALPS

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

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

Diversification Opportunities for Walmart and ALPS

0.89

Correlation Coefficient

Walmart  ALPS

Very poor diversification

The 3 months correlation between Walmart and ALPS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS 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 ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of Walmart i.e., Walmart and ALPS go up and down completely randomly.

Pair Corralation between Walmart and ALPS

Considering the 90-day investment horizon Walmart is expected to generate 1.11 times less return on investment than ALPS. But when comparing it to its historical volatility, Walmart is 1.13 times less risky than ALPS. It trades about 0.24 of its potential returns per unit of risk. ALPS is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,440  in ALPS on September 21, 2024 and sell it today you would earn a total of  148.50  from holding ALPS or generate 6.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	34.92%
Values	Daily Returns

Walmart  vs.  ALPS

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.

ALPS

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, ALPS showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and ALPS

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

The idea behind Walmart and ALPS 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.