Correlation Between Walmart and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Walmart and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Dow Jones Industrial, you can compare the effects of market volatilities on Walmart and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Dow Jones.
Diversification Opportunities for Walmart and Dow Jones
Very weak diversification
The 3 months correlation between Walmart and Dow is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Walmart i.e., Walmart and Dow Jones go up and down completely randomly.
Pair Corralation between Walmart and Dow Jones
Assuming the 90 days trading horizon Walmart is expected to generate 1.12 times less return on investment than Dow Jones. In addition to that, Walmart is 8.08 times more volatile than Dow Jones Industrial. It trades about 0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of volatility. If you would invest 3,304,278 in Dow Jones Industrial on September 19, 2024 and sell it today you would earn a total of 1,040,712 from holding Dow Jones Industrial or generate 31.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.47% |
| Values | Daily Returns |
Walmart vs. Dow Jones Industrial
Performance |
| Timeline |
Walmart and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Walmart
Pair trading matchups for Walmart
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Walmart and Dow Jones
The main advantage of trading using opposite Walmart and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Walmart vs. Compania de Transporte | Walmart vs. Harmony Gold Mining | Walmart vs. Agrometal SAI | Walmart vs. United States Steel |
| Dow Jones vs. Mangazeya Mining | Dow Jones vs. Summit Materials | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. AMCON Distributing |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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