Correlation Between Walmart and Definity Financial
Can any of the company-specific risk be diversified away by investing in both Walmart and Definity Financial 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 Definity Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart Inc CDR and Definity Financial Corp, you can compare the effects of market volatilities on Walmart and Definity Financial 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 Definity Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Definity Financial.
Diversification Opportunities for Walmart and Definity Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and Definity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Definity Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definity Financial Corp 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 Inc CDR are associated (or correlated) with Definity Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definity Financial Corp has no effect on the direction of Walmart i.e., Walmart and Definity Financial go up and down completely randomly.
Pair Corralation between Walmart and Definity Financial
Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.95 times more return on investment than Definity Financial. However, Walmart Inc CDR is 1.05 times less risky than Definity Financial. It trades about 0.09 of its potential returns per unit of risk. Definity Financial Corp is currently generating about -0.18 per unit of risk. If you would invest 3,926 in Walmart Inc CDR on September 23, 2024 and sell it today you would earn a total of 76.00 from holding Walmart Inc CDR or generate 1.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Walmart Inc CDR vs. Definity Financial Corp
Performance |
Timeline |
Walmart Inc CDR |
Definity Financial Corp |
Walmart and Definity Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and Definity Financial
The main advantage of trading using opposite Walmart and Definity Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Definity Financial 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 Definity Financial will offset losses from the drop in Definity Financial's long position.Walmart vs. Champion Iron | Walmart vs. MAG Silver Corp | Walmart vs. Partners Value Investments | Walmart vs. Upstart Investments |
Definity Financial vs. Intact Financial | Definity Financial vs. iA Financial | Definity Financial vs. TMX Group Limited | Definity Financial vs. CI Financial Corp |
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 CEOs Directory module to screen CEOs from public companies around the world.
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