Correlation Between Walmart and FIRSTCASH

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

By analyzing existing cross correlation between Walmart and FIRSTCASH INC 4625, you can compare the effects of market volatilities on Walmart and FIRSTCASH 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 FIRSTCASH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and FIRSTCASH.

Diversification Opportunities for Walmart and FIRSTCASH

0.51

Correlation Coefficient

Walmart  FIRSTCASH

Very weak diversification

The 3 months correlation between Walmart and FIRSTCASH is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and FIRSTCASH INC 4625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRSTCASH INC 4625 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 FIRSTCASH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRSTCASH INC 4625 has no effect on the direction of Walmart i.e., Walmart and FIRSTCASH go up and down completely randomly.

Pair Corralation between Walmart and FIRSTCASH

Considering the 90-day investment horizon Walmart is expected to under-perform the FIRSTCASH. In addition to that, Walmart is 5.8 times more volatile than FIRSTCASH INC 4625. It trades about -0.05 of its total potential returns per unit of risk. FIRSTCASH INC 4625 is currently generating about 0.03 per unit of volatility. If you would invest  9,453  in FIRSTCASH INC 4625 on December 25, 2024 and sell it today you would earn a total of  47.00  from holding FIRSTCASH INC 4625 or generate 0.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.83%
Values	Daily Returns

Walmart  vs.  FIRSTCASH INC 4625

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.

FIRSTCASH INC 4625

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FIRSTCASH INC 4625 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, FIRSTCASH is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and FIRSTCASH

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

The idea behind Walmart and FIRSTCASH INC 4625 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.