Correlation Between Walmart and STATE

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

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

Diversification Opportunities for Walmart and STATE

0.25

Correlation Coefficient

Walmart  STATE

Modest diversification

The 3 months correlation between Walmart and STATE is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and STATE STR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STATE STR 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 STATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STATE STR P has no effect on the direction of Walmart i.e., Walmart and STATE go up and down completely randomly.

Pair Corralation between Walmart and STATE

Considering the 90-day investment horizon Walmart is expected to generate 2.33 times more return on investment than STATE. However, Walmart is 2.33 times more volatile than STATE STR P. It trades about 0.05 of its potential returns per unit of risk. STATE STR P is currently generating about -0.11 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  391.00  from holding Walmart or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.22%
Values	Daily Returns

Walmart  vs.  STATE STR P

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

STATE STR P

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Walmart and STATE STR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..