Correlation Between Walmart and Schwab TIPS

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

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

Diversification Opportunities for Walmart and Schwab TIPS

-0.45

Correlation Coefficient

Walmart  Schwab TIPS

Very good diversification

The 3 months correlation between Walmart and Schwab is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Schwab TIPS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab TIPS ETF 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 Schwab TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab TIPS ETF has no effect on the direction of Walmart i.e., Walmart and Schwab TIPS go up and down completely randomly.

Pair Corralation between Walmart and Schwab TIPS

Considering the 90-day investment horizon Walmart is expected to generate 3.88 times more return on investment than Schwab TIPS. However, Walmart is 3.88 times more volatile than Schwab TIPS ETF. It trades about 0.3 of its potential returns per unit of risk. Schwab TIPS ETF is currently generating about -0.17 per unit of risk. If you would invest  7,889  in Walmart on September 20, 2024 and sell it today you would earn a total of  1,653  from holding Walmart or generate 20.95% return on investment over 90 days.

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

Walmart  vs.  Schwab TIPS ETF

Walmart

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 23 (%) 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.

Schwab TIPS ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab TIPS ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Schwab TIPS is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Walmart and Schwab TIPS

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

The idea behind Walmart and Schwab TIPS ETF 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.