Correlation Between Walmart and Mid Capitalization

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

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

Diversification Opportunities for Walmart and Mid Capitalization

-0.26

Correlation Coefficient

Walmart  Mid Capitalization

Very good diversification

The 3 months correlation between Walmart and Mid is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Mid Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Capitalization 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 Mid Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Capitalization has no effect on the direction of Walmart i.e., Walmart and Mid Capitalization go up and down completely randomly.

Pair Corralation between Walmart and Mid Capitalization

Considering the 90-day investment horizon Walmart is expected to generate 0.51 times more return on investment than Mid Capitalization. However, Walmart is 1.94 times less risky than Mid Capitalization. It trades about 0.08 of its potential returns per unit of risk. Mid Capitalization Portfolio is currently generating about -0.16 per unit of risk. If you would invest  9,244  in Walmart on December 1, 2024 and sell it today you would earn a total of  617.00  from holding Walmart or generate 6.67% return on investment over 90 days.

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

Walmart  vs.  Mid Capitalization Portfolio

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mid Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Capitalization Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Walmart and Mid Capitalization

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

The idea behind Walmart and Mid Capitalization Portfolio 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.