Correlation Between Walmart and PLAYMATES TOYS
Can any of the company-specific risk be diversified away by investing in both Walmart and PLAYMATES TOYS 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 PLAYMATES TOYS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and PLAYMATES TOYS, you can compare the effects of market volatilities on Walmart and PLAYMATES TOYS 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 PLAYMATES TOYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and PLAYMATES TOYS.
Diversification Opportunities for Walmart and PLAYMATES TOYS
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Walmart and PLAYMATES is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of Walmart i.e., Walmart and PLAYMATES TOYS go up and down completely randomly.
Pair Corralation between Walmart and PLAYMATES TOYS
Assuming the 90 days trading horizon Walmart is expected to generate 5.38 times less return on investment than PLAYMATES TOYS. But when comparing it to its historical volatility, Walmart is 1.79 times less risky than PLAYMATES TOYS. It trades about 0.04 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6.50 in PLAYMATES TOYS on September 25, 2024 and sell it today you would earn a total of 0.40 from holding PLAYMATES TOYS or generate 6.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Walmart vs. PLAYMATES TOYS
Performance |
| Timeline |
| Walmart |
| PLAYMATES TOYS |
Walmart and PLAYMATES TOYS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and PLAYMATES TOYS
The main advantage of trading using opposite Walmart and PLAYMATES TOYS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, PLAYMATES TOYS 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 PLAYMATES TOYS will offset losses from the drop in PLAYMATES TOYS's long position.| Walmart vs. AEGEAN AIRLINES | Walmart vs. Evolution Mining Limited | Walmart vs. Gol Intelligent Airlines | Walmart vs. JAPAN AIRLINES |
| PLAYMATES TOYS vs. Apple Inc | PLAYMATES TOYS vs. Apple Inc | PLAYMATES TOYS vs. Apple Inc | PLAYMATES TOYS vs. Microsoft |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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