Correlation Between Walmart and NowVertical

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

Diversification Opportunities for Walmart and NowVertical

0.9

Correlation Coefficient

Walmart  NowVertical

Almost no diversification

The 3 months correlation between Walmart and NowVertical is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and NowVertical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NowVertical Group 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 NowVertical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NowVertical Group has no effect on the direction of Walmart i.e., Walmart and NowVertical go up and down completely randomly.

Pair Corralation between Walmart and NowVertical

Assuming the 90 days trading horizon Walmart is expected to generate 8.19 times less return on investment than NowVertical. But when comparing it to its historical volatility, Walmart Inc CDR is 9.92 times less risky than NowVertical. It trades about 0.21 of its potential returns per unit of risk. NowVertical Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  14.00  in NowVertical Group on September 22, 2024 and sell it today you would earn a total of  19.00  from holding NowVertical Group or generate 135.71% return on investment over 90 days.

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

Walmart Inc CDR  vs.  NowVertical Group

Walmart Inc CDR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

NowVertical Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NowVertical Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NowVertical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and NowVertical

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

The idea behind Walmart Inc CDR and NowVertical Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.