Correlation Between Walmart and SPDR SP

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

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

Diversification Opportunities for Walmart and SPDR SP

0.66

Correlation Coefficient

Walmart  SPDR SP

Poor diversification

The 3 months correlation between Walmart and SPDR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and SPDR SP MIDCAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP MIDCAP 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP MIDCAP has no effect on the direction of Walmart i.e., Walmart and SPDR SP go up and down completely randomly.

Pair Corralation between Walmart and SPDR SP

Considering the 90-day investment horizon Walmart is expected to under-perform the SPDR SP. In addition to that, Walmart is 1.65 times more volatile than SPDR SP MIDCAP. It trades about -0.06 of its total potential returns per unit of risk. SPDR SP MIDCAP is currently generating about -0.06 per unit of volatility. If you would invest  57,085  in SPDR SP MIDCAP on December 27, 2024 and sell it today you would lose (2,483) from holding SPDR SP MIDCAP or give up 4.35% of portfolio value over 90 days.

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

Walmart  vs.  SPDR SP MIDCAP

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 latest unsteady performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SPDR SP MIDCAP

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP MIDCAP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and SPDR SP

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

The idea behind Walmart and SPDR SP MIDCAP 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.