Correlation Between Walmart and DCP Midstream

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

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

Diversification Opportunities for Walmart and DCP Midstream

0.0

Correlation Coefficient

Walmart  DCP Midstream

Pay attention - limited upside

The 3 months correlation between Walmart and DCP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and DCP Midstream LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCP Midstream LP 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 DCP Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCP Midstream LP has no effect on the direction of Walmart i.e., Walmart and DCP Midstream go up and down completely randomly.

Pair Corralation between Walmart and DCP Midstream

If you would invest  7,717  in Walmart on September 3, 2024 and sell it today you would earn a total of  1,533  from holding Walmart or generate 19.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Walmart  vs.  DCP Midstream LP

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

DCP Midstream LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCP Midstream LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, DCP Midstream is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Walmart and DCP Midstream

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

The idea behind Walmart and DCP Midstream LP 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.