Correlation Between Walmart and Dimensional Core

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

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

Diversification Opportunities for Walmart and Dimensional Core

0.86

Correlation Coefficient

Walmart  Dimensional Core

Very poor diversification

The 3 months correlation between Walmart and Dimensional is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Dimensional Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Core Equity 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 Dimensional Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Core Equity has no effect on the direction of Walmart i.e., Walmart and Dimensional Core go up and down completely randomly.

Pair Corralation between Walmart and Dimensional Core

Considering the 90-day investment horizon Walmart is expected to generate 1.45 times more return on investment than Dimensional Core. However, Walmart is 1.45 times more volatile than Dimensional Core Equity. It trades about 0.29 of its potential returns per unit of risk. Dimensional Core Equity is currently generating about 0.24 per unit of risk. If you would invest  7,696  in Walmart on September 5, 2024 and sell it today you would earn a total of  1,655  from holding Walmart or generate 21.5% return on investment over 90 days.

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

Walmart  vs.  Dimensional Core Equity

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 inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dimensional Core Equity

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Dimensional Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Dimensional Core

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

The idea behind Walmart and Dimensional Core Equity 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.