Correlation Between Nasdaq and Walmart
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Walmart, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Walmart.
Diversification Opportunities for Nasdaq and Walmart
Almost no diversification
The 3 months correlation between Nasdaq and Walmart is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Walmart go up and down completely randomly.
Pair Corralation between Nasdaq and Walmart
Given the investment horizon of 90 days Nasdaq is expected to generate 1.05 times less return on investment than Walmart. But when comparing it to its historical volatility, Nasdaq Inc is 1.01 times less risky than Walmart. It trades about 0.17 of its potential returns per unit of risk. Walmart is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,423 in Walmart on September 1, 2024 and sell it today you would earn a total of 3,827 from holding Walmart or generate 70.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Walmart
Performance |
| Timeline |
| Nasdaq Inc |
| Walmart |
Nasdaq and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Walmart
The main advantage of trading using opposite Nasdaq and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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.The idea behind Nasdaq Inc and Walmart pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Walmart vs. Ingles Markets Incorporated | Walmart vs. Sendas Distribuidora SA | Walmart vs. Grocery Outlet Holding | Walmart vs. Ocado Group plc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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