Correlation Between Walmart and First National

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

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

Diversification Opportunities for Walmart and First National

-0.35

Correlation Coefficient

Walmart  First National

Very good diversification

The 3 months correlation between Walmart and First is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and First National of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National has no effect on the direction of Walmart i.e., Walmart and First National go up and down completely randomly.

Pair Corralation between Walmart and First National

Considering the 90-day investment horizon Walmart is expected to generate 0.52 times more return on investment than First National. However, Walmart is 1.94 times less risky than First National. It trades about 0.13 of its potential returns per unit of risk. First National of is currently generating about 0.0 per unit of risk. If you would invest  4,703  in Walmart on September 29, 2024 and sell it today you would earn a total of  4,463  from holding Walmart or generate 94.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.26%
Values	Daily Returns

Walmart  vs.  First National of

Walmart

Risk-Adjusted Performance

15 of 100

Good

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

First National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First National of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First National is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walmart and First National

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

The idea behind Walmart and First National of 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.