Correlation Between Walmart and Western Asset

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

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

Diversification Opportunities for Walmart and Western Asset

-0.08

Correlation Coefficient

Walmart  Western Asset

Good diversification

The 3 months correlation between Walmart and Western is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Walmart i.e., Walmart and Western Asset go up and down completely randomly.

Pair Corralation between Walmart and Western Asset

Considering the 90-day investment horizon Walmart is expected to under-perform the Western Asset. In addition to that, Walmart is 5.44 times more volatile than Western Asset E. It trades about -0.05 of its total potential returns per unit of risk. Western Asset E is currently generating about 0.13 per unit of volatility. If you would invest  1,028  in Western Asset E on December 29, 2024 and sell it today you would earn a total of  26.00  from holding Western Asset E or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Walmart  vs.  Western Asset E

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.

Western Asset E

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset E are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Western Asset 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 Western Asset

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

The idea behind Walmart and Western Asset E 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.