Correlation Between Walmart and Nationwide

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

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

Diversification Opportunities for Walmart and Nationwide

0.87

Correlation Coefficient

Walmart  Nationwide

Very poor diversification

The 3 months correlation between Walmart and Nationwide is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Nationwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide 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 Nationwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide has no effect on the direction of Walmart i.e., Walmart and Nationwide go up and down completely randomly.

Pair Corralation between Walmart and Nationwide

If you would invest  8,389  in Walmart on September 19, 2024 and sell it today you would earn a total of  1,153  from holding Walmart or generate 13.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.76%
Values	Daily Returns

Walmart  vs.  Nationwide

Walmart

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 25 (%) 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.

Nationwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nationwide is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Walmart and Nationwide

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

The idea behind Walmart and Nationwide 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.