Correlation Between Walmart and GILEAD

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

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

Diversification Opportunities for Walmart and GILEAD

0.46

Correlation Coefficient

Walmart  GILEAD

Very weak diversification

The 3 months correlation between Walmart and GILEAD is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and GILEAD SCIENCES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GILEAD SCIENCES INC 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 GILEAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GILEAD SCIENCES INC has no effect on the direction of Walmart i.e., Walmart and GILEAD go up and down completely randomly.

Pair Corralation between Walmart and GILEAD

Considering the 90-day investment horizon Walmart is expected to generate 8.37 times more return on investment than GILEAD. However, Walmart is 8.37 times more volatile than GILEAD SCIENCES INC. It trades about 0.07 of its potential returns per unit of risk. GILEAD SCIENCES INC is currently generating about -0.07 per unit of risk. If you would invest  9,230  in Walmart on November 28, 2024 and sell it today you would earn a total of  539.00  from holding Walmart or generate 5.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Walmart  vs.  GILEAD SCIENCES INC

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in March 2025.

GILEAD SCIENCES INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GILEAD SCIENCES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GILEAD 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 GILEAD

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

The idea behind Walmart and GILEAD SCIENCES INC 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.