Correlation Between Walmart and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Walmart and Verizon Communications 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 Verizon Communications 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 Verizon Communications CDR, you can compare the effects of market volatilities on Walmart and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Verizon Communications.
Diversification Opportunities for Walmart and Verizon Communications
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Walmart and Verizon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Verizon Communications CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Walmart i.e., Walmart and Verizon Communications go up and down completely randomly.
Pair Corralation between Walmart and Verizon Communications
Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.74 times more return on investment than Verizon Communications. However, Walmart Inc CDR is 1.35 times less risky than Verizon Communications. It trades about 0.14 of its potential returns per unit of risk. Verizon Communications CDR is currently generating about 0.04 per unit of risk. If you would invest 2,157 in Walmart Inc CDR on August 24, 2024 and sell it today you would earn a total of 1,778 from holding Walmart Inc CDR or generate 82.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart Inc CDR vs. Verizon Communications CDR
Performance |
| Timeline |
| Walmart Inc CDR |
| Verizon Communications |
Walmart and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Verizon Communications
The main advantage of trading using opposite Walmart and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Walmart vs. Everyday People Financial | Walmart vs. Income Financial Trust | Walmart vs. Canso Credit Trust | Walmart vs. Definity Financial Corp |
| Verizon Communications vs. Alphabet Inc CDR | Verizon Communications vs. Microsoft Corp CDR | Verizon Communications vs. NVIDIA CDR | Verizon Communications vs. BOEING CDR |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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