Correlation Between Walmart and National Bank

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

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

Diversification Opportunities for Walmart and National Bank

-0.24

Correlation Coefficient

Walmart  National Bank

Very good diversification

The 3 months correlation between Walmart and National is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Walmart i.e., Walmart and National Bank go up and down completely randomly.

Pair Corralation between Walmart and National Bank

Considering the 90-day investment horizon Walmart is expected to under-perform the National Bank. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 2.66 times less risky than National Bank. The stock trades about -0.14 of its potential returns per unit of risk. The National Bank of is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  821.00  in National Bank of on October 8, 2024 and sell it today you would lose (21.00) from holding National Bank of or give up 2.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Walmart  vs.  National Bank of

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) 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.

National Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and National Bank

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

The idea behind Walmart and National Bank of 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.