Correlation Between Amazon CDR and Walmart
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and Walmart 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 Amazon CDR and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and Walmart Inc CDR, you can compare the effects of market volatilities on Amazon CDR and Walmart 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 Amazon CDR with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Walmart.
Diversification Opportunities for Amazon CDR and Walmart
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and Walmart is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR and Amazon CDR 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 Amazon CDR are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart Inc CDR has no effect on the direction of Amazon CDR i.e., Amazon CDR and Walmart go up and down completely randomly.
Pair Corralation between Amazon CDR and Walmart
Assuming the 90 days trading horizon Amazon CDR is expected to generate 2.28 times more return on investment than Walmart. However, Amazon CDR is 2.28 times more volatile than Walmart Inc CDR. It trades about 0.15 of its potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.27 per unit of risk. If you would invest 2,205 in Amazon CDR on August 24, 2024 and sell it today you would earn a total of 159.00 from holding Amazon CDR or generate 7.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon CDR vs. Walmart Inc CDR
Performance |
| Timeline |
| Amazon CDR |
| Walmart Inc CDR |
Amazon CDR and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Walmart
The main advantage of trading using opposite Amazon CDR and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| Amazon CDR vs. Quorum Information Technologies | Amazon CDR vs. Quisitive Technology Solutions | Amazon CDR vs. Canadian Utilities Limited | Amazon CDR vs. Information Services |
| Walmart vs. Everyday People Financial | Walmart vs. Income Financial Trust | Walmart vs. Canso Credit Trust | Walmart vs. Definity Financial Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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