Correlation Between Applied Materials and Walmart
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Walmart, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Walmart.
Diversification Opportunities for Applied Materials and Walmart
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Applied and Walmart is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Applied Materials 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 Applied Materials 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 has no effect on the direction of Applied Materials i.e., Applied Materials and Walmart go up and down completely randomly.
Pair Corralation between Applied Materials and Walmart
Assuming the 90 days horizon Applied Materials is expected to generate 1.22 times less return on investment than Walmart. In addition to that, Applied Materials is 2.14 times more volatile than Walmart. It trades about 0.06 of its total potential returns per unit of risk. Walmart is currently generating about 0.15 per unit of volatility. If you would invest 4,343 in Walmart on September 25, 2024 and sell it today you would earn a total of 4,238 from holding Walmart or generate 97.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.76% |
| Values | Daily Returns |
Applied Materials vs. Walmart
Performance |
| Timeline |
| Applied Materials |
| Walmart |
Applied Materials and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Walmart
The main advantage of trading using opposite Applied Materials and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Tokyo Electron Limited |
| Walmart vs. AEGEAN AIRLINES | Walmart vs. Evolution Mining Limited | Walmart vs. Gol Intelligent Airlines | Walmart vs. JAPAN AIRLINES |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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