Correlation Between Walmart and Security Federal

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

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

Diversification Opportunities for Walmart and Security Federal

0.79

Correlation Coefficient

Walmart  Security Federal

Poor diversification

The 3 months correlation between Walmart and Security is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Security Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Federal 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 Security Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Federal has no effect on the direction of Walmart i.e., Walmart and Security Federal go up and down completely randomly.

Pair Corralation between Walmart and Security Federal

Considering the 90-day investment horizon Walmart is expected to generate 0.42 times more return on investment than Security Federal. However, Walmart is 2.39 times less risky than Security Federal. It trades about 0.14 of its potential returns per unit of risk. Security Federal is currently generating about 0.02 per unit of risk. If you would invest  4,648  in Walmart on September 26, 2024 and sell it today you would earn a total of  4,620  from holding Walmart or generate 99.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	72.98%
Values	Daily Returns

Walmart  vs.  Security Federal

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) 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.

Security Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Security Federal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Security Federal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Walmart and Security Federal

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

The idea behind Walmart and Security Federal 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.