Correlation Between Walmart and Exchange Income

Can any of the company-specific risk be diversified away by investing in both Walmart and Exchange Income 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 Exchange Income 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 Exchange Income, you can compare the effects of market volatilities on Walmart and Exchange Income 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 Exchange Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Exchange Income.

Diversification Opportunities for Walmart and Exchange Income

0.66

Correlation Coefficient

Walmart  Exchange Income

Poor diversification

The 3 months correlation between Walmart and Exchange is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income 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 Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Walmart i.e., Walmart and Exchange Income go up and down completely randomly.

Pair Corralation between Walmart and Exchange Income

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 1.19 times more return on investment than Exchange Income. However, Walmart is 1.19 times more volatile than Exchange Income. It trades about 0.15 of its potential returns per unit of risk. Exchange Income is currently generating about 0.0 per unit of risk. If you would invest  3,882  in Walmart Inc CDR on September 24, 2024 and sell it today you would earn a total of  120.00  from holding Walmart Inc CDR or generate 3.09% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Exchange Income

Walmart Inc CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Exchange Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Exchange Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Exchange Income

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

The idea behind Walmart Inc CDR and Exchange Income 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.