Correlation Between US Financial and Walmart
Can any of the company-specific risk be diversified away by investing in both US Financial 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 US Financial and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Financial 15 and Walmart Inc CDR, you can compare the effects of market volatilities on US Financial 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 US Financial with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and Walmart.
Diversification Opportunities for US Financial and Walmart
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FTU and Walmart is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 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 US Financial 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 US Financial 15 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 US Financial i.e., US Financial and Walmart go up and down completely randomly.
Pair Corralation between US Financial and Walmart
Assuming the 90 days trading horizon US Financial 15 is expected to generate 6.08 times more return on investment than Walmart. However, US Financial is 6.08 times more volatile than Walmart Inc CDR. It trades about 0.05 of its potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.12 per unit of risk. If you would invest 38.00 in US Financial 15 on August 24, 2024 and sell it today you would earn a total of 30.00 from holding US Financial 15 or generate 78.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Financial 15 vs. Walmart Inc CDR
Performance |
| Timeline |
| US Financial 15 |
| Walmart Inc CDR |
US Financial and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Financial and Walmart
The main advantage of trading using opposite US Financial and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial 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.| US Financial vs. Walmart Inc CDR | US Financial vs. Amazon CDR | US Financial vs. UPS CDR | US Financial vs. HOME DEPOT CDR |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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