Correlation Between Walmart and Community Financial

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

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

Diversification Opportunities for Walmart and Community Financial

-0.43

Correlation Coefficient

Walmart  Community Financial

Very good diversification

The 3 months correlation between Walmart and Community is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Community Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Financial Corp 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 Community Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Financial Corp has no effect on the direction of Walmart i.e., Walmart and Community Financial go up and down completely randomly.

Pair Corralation between Walmart and Community Financial

Considering the 90-day investment horizon Walmart is expected to generate 0.52 times more return on investment than Community Financial. However, Walmart is 1.92 times less risky than Community Financial. It trades about 0.13 of its potential returns per unit of risk. Community Financial Corp is currently generating about -0.14 per unit of risk. If you would invest  4,703  in Walmart on September 30, 2024 and sell it today you would earn a total of  4,463  from holding Walmart or generate 94.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	24.35%
Values	Daily Returns

Walmart  vs.  Community Financial Corp

Walmart

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 14 (%) 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.

Community Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Community Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Community Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walmart and Community Financial

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

The idea behind Walmart and Community Financial Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.