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

Walmart  College Retirement

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 1.1 times more return on investment than College Retirement. However, Walmart is 1.1 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 0.25 per unit of risk. If you would invest  7,734  in Walmart on September 7, 2024 and sell it today you would earn a total of  1,796  from holding Walmart or generate 23.22% 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

Walmart

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 24 (%) 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.

College Retirement

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in College Retirement Equities are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, College Retirement showed solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind Walmart and College Retirement Equities 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.