Correlation Between Walmart and Fastly

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

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

Diversification Opportunities for Walmart and Fastly

0.83

Correlation Coefficient

Walmart  Fastly

Very poor diversification

The 3 months correlation between Walmart and Fastly is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Fastly Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastly Inc 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 Fastly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastly Inc has no effect on the direction of Walmart i.e., Walmart and Fastly go up and down completely randomly.

Pair Corralation between Walmart and Fastly

Assuming the 90 days trading horizon Walmart is expected to generate 1.85 times less return on investment than Fastly. But when comparing it to its historical volatility, Walmart is 3.84 times less risky than Fastly. It trades about 0.3 of its potential returns per unit of risk. Fastly Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  651.00  in Fastly Inc on September 24, 2024 and sell it today you would earn a total of  276.00  from holding Fastly Inc or generate 42.4% return on investment over 90 days.

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

Walmart  vs.  Fastly Inc

Walmart

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fastly Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fastly Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fastly unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Fastly

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

The idea behind Walmart and Fastly Inc 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.