Correlation Between Target and Wal-Mart
Can any of the company-specific risk be diversified away by investing in both Target and Wal-Mart 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 Target and Wal-Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Wal Mart de Mxico, you can compare the effects of market volatilities on Target and Wal-Mart 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 Target with a short position of Wal-Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Wal-Mart.
Diversification Opportunities for Target and Wal-Mart
Very good diversification
The 3 months correlation between Target and Wal-Mart is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Target and Wal Mart de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de and Target 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 Target are associated (or correlated) with Wal-Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of Target i.e., Target and Wal-Mart go up and down completely randomly.
Pair Corralation between Target and Wal-Mart
Assuming the 90 days horizon Target is expected to under-perform the Wal-Mart. But the stock apears to be less risky and, when comparing its historical volatility, Target is 4.15 times less risky than Wal-Mart. The stock trades about -0.05 of its potential returns per unit of risk. The Wal Mart de Mxico is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 83.00 in Wal Mart de Mxico on September 1, 2024 and sell it today you would earn a total of 163.00 from holding Wal Mart de Mxico or generate 196.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target vs. Wal Mart de Mxico
Performance |
| Timeline |
| Target |
| Wal Mart de |
Target and Wal-Mart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target and Wal-Mart
The main advantage of trading using opposite Target and Wal-Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target position performs unexpectedly, Wal-Mart 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 Wal-Mart will offset losses from the drop in Wal-Mart's long position.| Target vs. TOREX SEMICONDUCTOR LTD | Target vs. MagnaChip Semiconductor Corp | Target vs. Magnachip Semiconductor | Target vs. DELTA AIR LINES |
| Wal-Mart vs. Renesas Electronics | Wal-Mart vs. Meiko Electronics Co | Wal-Mart vs. UET United Electronic | Wal-Mart vs. Eastman Chemical |
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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