Correlation Between Walmart and Tremor Video

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

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

Diversification Opportunities for Walmart and Tremor Video

0.8

Correlation Coefficient

Walmart  Tremor Video

Very poor diversification

The 3 months correlation between Walmart and Tremor is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Tremor Video in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tremor Video 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 Tremor Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tremor Video has no effect on the direction of Walmart i.e., Walmart and Tremor Video go up and down completely randomly.

Pair Corralation between Walmart and Tremor Video

Considering the 90-day investment horizon Walmart is expected to generate 1.08 times less return on investment than Tremor Video. But when comparing it to its historical volatility, Walmart is 3.08 times less risky than Tremor Video. It trades about 0.15 of its potential returns per unit of risk. Tremor Video is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  634.00  in Tremor Video on September 18, 2024 and sell it today you would earn a total of  111.00  from holding Tremor Video or generate 17.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	28.89%
Values	Daily Returns

Walmart  vs.  Tremor Video

Walmart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) 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.

Tremor Video

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Walmart and Tremor Video

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

The idea behind Walmart and Tremor Video 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.