Correlation Between KMBB34 and Walmart
Can any of the company-specific risk be diversified away by investing in both KMBB34 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 KMBB34 and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KMBB34 and Walmart, you can compare the effects of market volatilities on KMBB34 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 KMBB34 with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMBB34 and Walmart.
Diversification Opportunities for KMBB34 and Walmart
Poor diversification
The 3 months correlation between KMBB34 and Walmart is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KMBB34 and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and KMBB34 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 KMBB34 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 has no effect on the direction of KMBB34 i.e., KMBB34 and Walmart go up and down completely randomly.
Pair Corralation between KMBB34 and Walmart
Assuming the 90 days trading horizon KMBB34 is expected to generate 3.33 times less return on investment than Walmart. But when comparing it to its historical volatility, KMBB34 is 1.17 times less risky than Walmart. It trades about 0.09 of its potential returns per unit of risk. Walmart is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,746 in Walmart on September 24, 2024 and sell it today you would earn a total of 740.00 from holding Walmart or generate 26.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
KMBB34 vs. Walmart
Performance |
Timeline |
KMBB34 |
Walmart |
KMBB34 and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KMBB34 and Walmart
The main advantage of trading using opposite KMBB34 and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMBB34 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.KMBB34 vs. Southwest Airlines Co | KMBB34 vs. Global X Funds | KMBB34 vs. Automatic Data Processing | KMBB34 vs. Nordon Indstrias Metalrgicas |
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Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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