Correlation Between Walmart and North American
Can any of the company-specific risk be diversified away by investing in both Walmart and North American 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 North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart Inc CDR and North American Financial, you can compare the effects of market volatilities on Walmart and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and North American.
Diversification Opportunities for Walmart and North American
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and North is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 Inc CDR are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Walmart i.e., Walmart and North American go up and down completely randomly.
Pair Corralation between Walmart and North American
Assuming the 90 days trading horizon Walmart is expected to generate 1.09 times less return on investment than North American. But when comparing it to its historical volatility, Walmart Inc CDR is 1.57 times less risky than North American. It trades about 0.39 of its potential returns per unit of risk. North American Financial is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 685.00 in North American Financial on August 29, 2024 and sell it today you would earn a total of 75.00 from holding North American Financial or generate 10.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart Inc CDR vs. North American Financial
Performance |
| Timeline |
| Walmart Inc CDR |
| North American Financial |
Walmart and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and North American
The main advantage of trading using opposite Walmart and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Walmart vs. Chatham Rock Phosphate | Walmart vs. Alaska Energy Metals | Walmart vs. Elixxer | Walmart vs. Cielo Waste Solutions |
| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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