Correlation Between Vanguard Small and Walmart
Can any of the company-specific risk be diversified away by investing in both Vanguard Small 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 Vanguard Small and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Walmart, you can compare the effects of market volatilities on Vanguard Small 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 Vanguard Small with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Walmart.
Diversification Opportunities for Vanguard Small and Walmart
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Walmart is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Vanguard Small 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 Vanguard Small Cap Index 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 Vanguard Small i.e., Vanguard Small and Walmart go up and down completely randomly.
Pair Corralation between Vanguard Small and Walmart
Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.51 times less return on investment than Walmart. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.14 times less risky than Walmart. It trades about 0.19 of its potential returns per unit of risk. Walmart is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 8,060 in Walmart on September 13, 2024 and sell it today you would earn a total of 1,436 from holding Walmart or generate 17.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Walmart
Performance |
| Timeline |
| Vanguard Small Cap |
| Walmart |
Vanguard Small and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Walmart
The main advantage of trading using opposite Vanguard Small and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
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.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |