Correlation Between Walmart and American Tower
Can any of the company-specific risk be diversified away by investing in both Walmart and American Tower 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 Walmart and American Tower into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and American Tower, you can compare the effects of market volatilities on Walmart and American Tower 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 Walmart with a short position of American Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and American Tower.
Diversification Opportunities for Walmart and American Tower
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Walmart and American is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and American Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower and Walmart 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 Walmart are associated (or correlated) with American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower has no effect on the direction of Walmart i.e., Walmart and American Tower go up and down completely randomly.
Pair Corralation between Walmart and American Tower
Assuming the 90 days trading horizon Walmart is expected to under-perform the American Tower. In addition to that, Walmart is 1.23 times more volatile than American Tower. It trades about -0.02 of its total potential returns per unit of risk. American Tower is currently generating about 0.09 per unit of volatility. If you would invest 4,730 in American Tower on November 28, 2024 and sell it today you would earn a total of 160.00 from holding American Tower or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. American Tower
Performance |
| Timeline |
| Walmart |
| American Tower |
Walmart and American Tower Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and American Tower
The main advantage of trading using opposite Walmart and American Tower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, American Tower 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 American Tower will offset losses from the drop in American Tower's long position.| Walmart vs. Metalrgica Riosulense SA | Walmart vs. Eastman Chemical | Walmart vs. Universal Health Services, | Walmart vs. Iron Mountain Incorporated |
| American Tower vs. Fresenius Medical Care | American Tower vs. Bemobi Mobile Tech | American Tower vs. Guidewire Software, | American Tower vs. Delta Air Lines |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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