Correlation Between Walmart and NATIONAL

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

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

Diversification Opportunities for Walmart and NATIONAL

-0.64

Correlation Coefficient

Walmart  NATIONAL

Excellent diversification

The 3 months correlation between Walmart and NATIONAL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and NATIONAL RURAL UTILS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL RURAL UTILS 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 NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL RURAL UTILS has no effect on the direction of Walmart i.e., Walmart and NATIONAL go up and down completely randomly.

Pair Corralation between Walmart and NATIONAL

Considering the 90-day investment horizon Walmart is expected to generate 42.14 times less return on investment than NATIONAL. But when comparing it to its historical volatility, Walmart is 76.98 times less risky than NATIONAL. It trades about 0.13 of its potential returns per unit of risk. NATIONAL RURAL UTILS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,429  in NATIONAL RURAL UTILS on September 1, 2024 and sell it today you would earn a total of  89.00  from holding NATIONAL RURAL UTILS or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	62.83%
Values	Daily Returns

Walmart  vs.  NATIONAL RURAL UTILS

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 weak primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

NATIONAL RURAL UTILS

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Walmart and NATIONAL RURAL UTILS 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.