Correlation Between Walmart and Tesla
Can any of the company-specific risk be diversified away by investing in both Walmart and Tesla 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 Tesla 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 Tesla Inc CDR, you can compare the effects of market volatilities on Walmart and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Tesla.
Diversification Opportunities for Walmart and Tesla
Very poor diversification
The 3 months correlation between Walmart and Tesla is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Tesla Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc CDR 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc CDR has no effect on the direction of Walmart i.e., Walmart and Tesla go up and down completely randomly.
Pair Corralation between Walmart and Tesla
Assuming the 90 days trading horizon Walmart is expected to generate 8.43 times less return on investment than Tesla. But when comparing it to its historical volatility, Walmart Inc CDR is 6.62 times less risky than Tesla. It trades about 0.27 of its potential returns per unit of risk. Tesla Inc CDR is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,951 in Tesla Inc CDR on August 24, 2024 and sell it today you would earn a total of 1,148 from holding Tesla Inc CDR or generate 58.84% 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. Tesla Inc CDR
Performance |
| Timeline |
| Walmart Inc CDR |
| Tesla Inc CDR |
Walmart and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Tesla
The main advantage of trading using opposite Walmart and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| Walmart vs. Everyday People Financial | Walmart vs. Income Financial Trust | Walmart vs. Canso Credit Trust | Walmart vs. Definity Financial Corp |
| Tesla vs. Income Financial Trust | Tesla vs. Brookfield Investments | Tesla vs. Royal Bank of | Tesla vs. Everyday People Financial |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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