Correlation Between Walmart and AMERICAN

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

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

Diversification Opportunities for Walmart and AMERICAN

0.11

Correlation Coefficient

Walmart  AMERICAN

Average diversification

The 3 months correlation between Walmart and AMERICAN is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and AMERICAN FINL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FINL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN FINL GROUP has no effect on the direction of Walmart i.e., Walmart and AMERICAN go up and down completely randomly.

Pair Corralation between Walmart and AMERICAN

Considering the 90-day investment horizon Walmart is expected to under-perform the AMERICAN. In addition to that, Walmart is 2.38 times more volatile than AMERICAN FINL GROUP. It trades about -0.05 of its total potential returns per unit of risk. AMERICAN FINL GROUP is currently generating about 0.07 per unit of volatility. If you would invest  8,348  in AMERICAN FINL GROUP on December 25, 2024 and sell it today you would earn a total of  262.00  from holding AMERICAN FINL GROUP or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Walmart  vs.  AMERICAN FINL GROUP

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

AMERICAN FINL GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FINL GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and AMERICAN

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

The idea behind Walmart and AMERICAN FINL GROUP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..