Correlation Between American Express and Walmart
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express Co and Walmart, you can compare the effects of market volatilities on American Express 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 American Express with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Walmart.
Diversification Opportunities for American Express and Walmart
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Walmart is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and American Express 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 American Express Co 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 American Express i.e., American Express and Walmart go up and down completely randomly.
Pair Corralation between American Express and Walmart
Assuming the 90 days trading horizon American Express Co is expected to generate 1.22 times more return on investment than Walmart. However, American Express is 1.22 times more volatile than Walmart. It trades about 0.29 of its potential returns per unit of risk. Walmart is currently generating about 0.07 per unit of risk. If you would invest 2,257,500 in American Express Co on October 20, 2024 and sell it today you would earn a total of 215,000 from holding American Express Co or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
American Express Co vs. Walmart
Performance |
| Timeline |
| American Express |
| Walmart |
American Express and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Walmart
The main advantage of trading using opposite American Express and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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.| American Express vs. United States Steel | American Express vs. Agrometal SAI | American Express vs. Telecom Argentina | American Express vs. Compania de Transporte |
| Walmart vs. United States Steel | Walmart vs. Telecom Argentina | Walmart vs. Transportadora de Gas | Walmart vs. Agrometal SAI |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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