Correlation Between Walmart and A1VY34

Can any of the company-specific risk be diversified away by investing in both Walmart and A1VY34 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 A1VY34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and A1VY34, you can compare the effects of market volatilities on Walmart and A1VY34 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 A1VY34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and A1VY34.

Diversification Opportunities for Walmart and A1VY34

0.81

Correlation Coefficient

Walmart  A1VY34

Very poor diversification

The 3 months correlation between Walmart and A1VY34 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and A1VY34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1VY34 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 A1VY34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1VY34 has no effect on the direction of Walmart i.e., Walmart and A1VY34 go up and down completely randomly.

Pair Corralation between Walmart and A1VY34

Assuming the 90 days trading horizon Walmart is expected to generate 38.37 times more return on investment than A1VY34. However, Walmart is 38.37 times more volatile than A1VY34. It trades about 0.28 of its potential returns per unit of risk. A1VY34 is currently generating about 0.13 per unit of risk. If you would invest  2,726  in Walmart on September 26, 2024 and sell it today you would earn a total of  780.00  from holding Walmart or generate 28.61% return on investment over 90 days.

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

Walmart  vs.  A1VY34

Walmart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

A1VY34

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in A1VY34 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, A1VY34 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and A1VY34

The main advantage of trading using opposite Walmart and A1VY34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, A1VY34 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 A1VY34 will offset losses from the drop in A1VY34's long position.

The idea behind Walmart and A1VY34 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.