Correlation Between Walmart and Universal Music
Can any of the company-specific risk be diversified away by investing in both Walmart and Universal Music 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 Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Universal Music Group, you can compare the effects of market volatilities on Walmart and Universal Music 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 Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Universal Music.
Diversification Opportunities for Walmart and Universal Music
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Universal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Walmart i.e., Walmart and Universal Music go up and down completely randomly.
Pair Corralation between Walmart and Universal Music
Assuming the 90 days trading horizon Walmart is expected to generate 8.02 times more return on investment than Universal Music. However, Walmart is 8.02 times more volatile than Universal Music Group. It trades about 0.05 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.02 per unit of risk. If you would invest 4,328 in Walmart on October 13, 2024 and sell it today you would earn a total of 1,632 from holding Walmart or generate 37.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.61% |
| Values | Daily Returns |
Walmart vs. Universal Music Group
Performance |
| Timeline |
| Walmart |
| Universal Music Group |
Walmart and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Universal Music
The main advantage of trading using opposite Walmart and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music's long position.| Walmart vs. Micron Technology | Walmart vs. Check Point Software | Walmart vs. International Biotechnology Trust | Walmart vs. SMA Solar Technology |
| Universal Music vs. Walmart | Universal Music vs. BYD Co | Universal Music vs. Volkswagen AG | Universal Music vs. Volkswagen AG Non Vtg |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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