Correlation Between Walmart and Ballast SmallMid

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

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

Diversification Opportunities for Walmart and Ballast SmallMid

0.9

Correlation Coefficient

Walmart  Ballast SmallMid

Almost no diversification

The 3 months correlation between Walmart and Ballast is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Ballast SmallMid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballast SmallMid Cap 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 Ballast SmallMid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballast SmallMid Cap has no effect on the direction of Walmart i.e., Walmart and Ballast SmallMid go up and down completely randomly.

Pair Corralation between Walmart and Ballast SmallMid

Considering the 90-day investment horizon Walmart is expected to generate 0.87 times more return on investment than Ballast SmallMid. However, Walmart is 1.14 times less risky than Ballast SmallMid. It trades about 0.27 of its potential returns per unit of risk. Ballast SmallMid Cap is currently generating about 0.23 per unit of risk. If you would invest  7,717  in Walmart on September 1, 2024 and sell it today you would earn a total of  1,533  from holding Walmart or generate 19.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Walmart  vs.  Ballast SmallMid Cap

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ballast SmallMid Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ballast SmallMid Cap are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Ballast SmallMid unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Ballast SmallMid

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

The idea behind Walmart and Ballast SmallMid Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.