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
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Mid is 0.69. 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 under-perform the Mid Capitalization. In addition to that, Walmart is 1.57 times more volatile than Mid Capitalization Portfolio. It trades about -0.05 of its total potential returns per unit of risk. Mid Capitalization Portfolio is currently generating about -0.07 per unit of volatility. If you would invest 769.00 in Mid Capitalization Portfolio on December 27, 2024 and sell it today you would lose (40.00) from holding Mid Capitalization Portfolio or give up 5.2% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Walmart vs. Mid Capitalization Portfolio
Performance |
Timeline |
Walmart |
Mid Capitalization |
Walmart and Mid Capitalization Volatility Contrast
Predicted Return Density |
Returns |
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.Walmart vs. Natural Grocers by | Walmart vs. Albertsons Companies | Walmart vs. Ingles Markets Incorporated | Walmart vs. Village Super Market |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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