Correlation Between Walmart and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Walmart and Leons Furniture 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 Leons Furniture 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 Leons Furniture Limited, you can compare the effects of market volatilities on Walmart and Leons Furniture 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 Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Leons Furniture.
Diversification Opportunities for Walmart and Leons Furniture
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Walmart and Leons is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture 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 Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Walmart i.e., Walmart and Leons Furniture go up and down completely randomly.
Pair Corralation between Walmart and Leons Furniture
Assuming the 90 days trading horizon Walmart is expected to generate 1.0 times less return on investment than Leons Furniture. But when comparing it to its historical volatility, Walmart Inc CDR is 1.99 times less risky than Leons Furniture. It trades about 0.13 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,534 in Leons Furniture Limited on September 4, 2024 and sell it today you would earn a total of 1,136 from holding Leons Furniture Limited or generate 74.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart Inc CDR vs. Leons Furniture Limited
Performance |
| Timeline |
| Walmart Inc CDR |
| Leons Furniture |
Walmart and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Leons Furniture
The main advantage of trading using opposite Walmart and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Walmart vs. Canadian General Investments | Walmart vs. Contagious Gaming | Walmart vs. Maple Peak Investments | Walmart vs. Upstart Investments |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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