Correlation Between Walmart and CARRIER

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

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

Diversification Opportunities for Walmart and CARRIER

-0.67

Correlation Coefficient

Walmart  CARRIER

Excellent diversification

The 3 months correlation between Walmart and CARRIER is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and CARRIER GLOBAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARRIER GLOBAL P 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 CARRIER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARRIER GLOBAL P has no effect on the direction of Walmart i.e., Walmart and CARRIER go up and down completely randomly.

Pair Corralation between Walmart and CARRIER

Considering the 90-day investment horizon Walmart is expected to generate 1.31 times more return on investment than CARRIER. However, Walmart is 1.31 times more volatile than CARRIER GLOBAL P. It trades about 0.28 of its potential returns per unit of risk. CARRIER GLOBAL P is currently generating about -0.14 per unit of risk. If you would invest  7,843  in Walmart on September 17, 2024 and sell it today you would earn a total of  1,582  from holding Walmart or generate 20.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Walmart  vs.  CARRIER GLOBAL P

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.

CARRIER GLOBAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARRIER GLOBAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CARRIER GLOBAL P investors.

Pair Trading with Walmart and CARRIER

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

The idea behind Walmart and CARRIER GLOBAL P 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.