Correlation Between Walmart and ProShares

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

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

Diversification Opportunities for Walmart and ProShares

0.88

Correlation Coefficient

Walmart  ProShares

Very poor diversification

The 3 months correlation between Walmart and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Walmart i.e., Walmart and ProShares go up and down completely randomly.

Pair Corralation between Walmart and ProShares

Considering the 90-day investment horizon Walmart is expected to under-perform the ProShares. In addition to that, Walmart is 1.25 times more volatile than ProShares SP 500. It trades about -0.14 of its total potential returns per unit of risk. ProShares SP 500 is currently generating about -0.09 per unit of volatility. If you would invest  6,493  in ProShares SP 500 on October 8, 2024 and sell it today you would lose (103.00) from holding ProShares SP 500 or give up 1.59% of portfolio value over 90 days.

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

Walmart  vs.  ProShares SP 500

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

ProShares SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ProShares is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walmart and ProShares

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

The idea behind Walmart and ProShares 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.