Correlation Between Walmart and WisdomTree Managed

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

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

Diversification Opportunities for Walmart and WisdomTree Managed

0.57

Correlation Coefficient

Walmart  WisdomTree Managed

Very weak diversification

The 3 months correlation between Walmart and WisdomTree is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and WisdomTree Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Managed 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 WisdomTree Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Managed has no effect on the direction of Walmart i.e., Walmart and WisdomTree Managed go up and down completely randomly.

Pair Corralation between Walmart and WisdomTree Managed

Considering the 90-day investment horizon Walmart is expected to under-perform the WisdomTree Managed. In addition to that, Walmart is 3.29 times more volatile than WisdomTree Managed Futures. It trades about -0.05 of its total potential returns per unit of risk. WisdomTree Managed Futures is currently generating about -0.03 per unit of volatility. If you would invest  3,474  in WisdomTree Managed Futures on December 30, 2024 and sell it today you would lose (41.00) from holding WisdomTree Managed Futures or give up 1.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  WisdomTree Managed Futures

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Managed Futures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, WisdomTree Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and WisdomTree Managed

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

The idea behind Walmart and WisdomTree Managed Futures 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 Transaction History module to view history of all your transactions and understand their impact on performance.