Correlation Between First National and Walmart

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

By analyzing existing cross correlation between First National Financial and Walmart Inc CDR, you can compare the effects of market volatilities on First National and Walmart 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 First National with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Walmart.

Diversification Opportunities for First National and Walmart

0.74

Correlation Coefficient

First National  Walmart

Poor diversification

The 3 months correlation between First and Walmart is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR and First National 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 First National Financial are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart Inc CDR has no effect on the direction of First National i.e., First National and Walmart go up and down completely randomly.

Pair Corralation between First National and Walmart

Assuming the 90 days trading horizon First National is expected to generate 2.4 times less return on investment than Walmart. In addition to that, First National is 1.07 times more volatile than Walmart Inc CDR. It trades about 0.09 of its total potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.23 per unit of volatility. If you would invest  3,516  in Walmart Inc CDR on September 14, 2024 and sell it today you would earn a total of  577.00  from holding Walmart Inc CDR or generate 16.41% return on investment over 90 days.

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

First National Financial  vs.  Walmart Inc CDR

First National Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Walmart Inc CDR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First National and Walmart

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

The idea behind First National Financial and Walmart Inc CDR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.