Correlation Between Walmart and Treasury Wine

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

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

Diversification Opportunities for Walmart and Treasury Wine

-0.7

Correlation Coefficient

Walmart  Treasury Wine

Excellent diversification

The 3 months correlation between Walmart and Treasury is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Walmart i.e., Walmart and Treasury Wine go up and down completely randomly.

Pair Corralation between Walmart and Treasury Wine

Considering the 90-day investment horizon Walmart is expected to generate 0.49 times more return on investment than Treasury Wine. However, Walmart is 2.04 times less risky than Treasury Wine. It trades about 0.27 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.08 per unit of risk. If you would invest  7,717  in Walmart on September 3, 2024 and sell it today you would earn a total of  1,533  from holding Walmart or generate 19.87% return on investment over 90 days.

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

Walmart  vs.  Treasury Wine Estates

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Walmart and Treasury Wine

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

The idea behind Walmart and Treasury Wine Estates 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.