Correlation Between Walmart and Mainstay Epoch

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

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

Diversification Opportunities for Walmart and Mainstay Epoch

0.75

Correlation Coefficient

Walmart  Mainstay Epoch

Poor diversification

The 3 months correlation between Walmart and Mainstay is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Mainstay Epoch Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Epoch Small 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 Mainstay Epoch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Epoch Small has no effect on the direction of Walmart i.e., Walmart and Mainstay Epoch go up and down completely randomly.

Pair Corralation between Walmart and Mainstay Epoch

Considering the 90-day investment horizon Walmart is expected to generate 0.83 times more return on investment than Mainstay Epoch. However, Walmart is 1.21 times less risky than Mainstay Epoch. It trades about 0.13 of its potential returns per unit of risk. Mainstay Epoch Small is currently generating about 0.04 per unit of risk. If you would invest  4,685  in Walmart on October 5, 2024 and sell it today you would earn a total of  4,315  from holding Walmart or generate 92.1% return on investment over 90 days.

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

Walmart  vs.  Mainstay Epoch Small

Walmart

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) 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.

Mainstay Epoch Small

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Epoch Small are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mainstay Epoch may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and Mainstay Epoch

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

The idea behind Walmart and Mainstay Epoch Small 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.