Correlation Between Walmart and Invesco SP

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

By analyzing existing cross correlation between Walmart and Invesco SP 500, you can compare the effects of market volatilities on Walmart and Invesco 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Invesco SP.

Diversification Opportunities for Walmart and Invesco SP

0.93

Correlation Coefficient

Walmart  Invesco SP

Almost no diversification

The 3 months correlation between Walmart and Invesco is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Walmart i.e., Walmart and Invesco SP go up and down completely randomly.

Pair Corralation between Walmart and Invesco SP

Considering the 90-day investment horizon Walmart is expected to generate 1.13 times more return on investment than Invesco SP. However, Walmart is 1.13 times more volatile than Invesco SP 500. It trades about 0.14 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.06 per unit of risk. If you would invest  4,600  in Walmart on September 20, 2024 and sell it today you would earn a total of  4,740  from holding Walmart or generate 103.04% return on investment over 90 days.

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

Walmart  vs.  Invesco SP 500

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) 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.

Invesco SP 500

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Invesco SP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Walmart and Invesco SP

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

The idea behind Walmart and Invesco SP 500 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.