Correlation Between Walmart and Invesco DWA

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

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

Diversification Opportunities for Walmart and Invesco DWA

0.89

Correlation Coefficient

Walmart  Invesco DWA

Very poor diversification

The 3 months correlation between Walmart and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Invesco DWA Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Momentum 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 DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Momentum has no effect on the direction of Walmart i.e., Walmart and Invesco DWA go up and down completely randomly.

Pair Corralation between Walmart and Invesco DWA

Considering the 90-day investment horizon Walmart is expected to generate 1.06 times more return on investment than Invesco DWA. However, Walmart is 1.06 times more volatile than Invesco DWA Momentum. It trades about 0.23 of its potential returns per unit of risk. Invesco DWA Momentum is currently generating about 0.18 per unit of risk. If you would invest  8,056  in Walmart on September 14, 2024 and sell it today you would earn a total of  1,369  from holding Walmart or generate 16.99% return on investment over 90 days.

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

Walmart  vs.  Invesco DWA Momentum

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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 DWA Momentum

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Momentum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Invesco DWA

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

The idea behind Walmart and Invesco DWA Momentum 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.