Correlation Between Walmart and College Retirement
Can any of the company-specific risk be diversified away by investing in both Walmart and College Retirement 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 College Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and College Retirement Equities, you can compare the effects of market volatilities on Walmart and College Retirement 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 College Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and College Retirement.
Diversification Opportunities for Walmart and College Retirement
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and College is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and College Retirement Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on College Retirement 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 College Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of College Retirement has no effect on the direction of Walmart i.e., Walmart and College Retirement go up and down completely randomly.
Pair Corralation between Walmart and College Retirement
Considering the 90-day investment horizon Walmart is expected to generate 1.09 times more return on investment than College Retirement. However, Walmart is 1.09 times more volatile than College Retirement Equities. It trades about 0.31 of its potential returns per unit of risk. College Retirement Equities is currently generating about 0.27 per unit of risk. If you would invest 7,664 in Walmart on September 6, 2024 and sell it today you would earn a total of 1,781 from holding Walmart or generate 23.24% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Walmart vs. College Retirement Equities
Performance |
Timeline |
Walmart |
College Retirement |
Walmart and College Retirement Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and College Retirement
The main advantage of trading using opposite Walmart and College Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, College Retirement 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 College Retirement will offset losses from the drop in College Retirement's long position.Walmart vs. Aquagold International | Walmart vs. Thrivent High Yield | Walmart vs. Morningstar Unconstrained Allocation | Walmart vs. Via Renewables |
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Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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