Correlation Between Dairy Farm and Walmart
Can any of the company-specific risk be diversified away by investing in both Dairy Farm 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 Dairy Farm and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and Walmart, you can compare the effects of market volatilities on Dairy Farm 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 Dairy Farm with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Walmart.
Diversification Opportunities for Dairy Farm and Walmart
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dairy and Walmart is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Walmart go up and down completely randomly.
Pair Corralation between Dairy Farm and Walmart
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the Walmart. In addition to that, Dairy Farm is 1.53 times more volatile than Walmart. It trades about -0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.37 per unit of volatility. If you would invest 8,040 in Walmart on September 15, 2024 and sell it today you would earn a total of 959.00 from holding Walmart or generate 11.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. Walmart
Performance |
| Timeline |
| Dairy Farm International |
| Walmart |
Dairy Farm and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and Walmart
The main advantage of trading using opposite Dairy Farm and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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.| Dairy Farm vs. Q2M Managementberatung AG | Dairy Farm vs. Coor Service Management | Dairy Farm vs. Ares Management Corp | Dairy Farm vs. Air New Zealand |
| Walmart vs. ATRYS HEALTH SA | Walmart vs. Dairy Farm International | Walmart vs. Natural Health Trends | Walmart vs. DiamondRock Hospitality |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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