Correlation Between Walmart and Bank of America
Can any of the company-specific risk be diversified away by investing in both Walmart and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Bank of America, you can compare the effects of market volatilities on Walmart and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Bank of America.
Diversification Opportunities for Walmart and Bank of America
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Walmart and Bank is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Walmart i.e., Walmart and Bank of America go up and down completely randomly.
Pair Corralation between Walmart and Bank of America
Considering the 90-day investment horizon Walmart is expected to generate 0.76 times more return on investment than Bank of America. However, Walmart is 1.32 times less risky than Bank of America. It trades about 0.42 of its potential returns per unit of risk. Bank of America is currently generating about -0.12 per unit of risk. If you would invest 9,078 in Walmart on November 4, 2024 and sell it today you would earn a total of 738.00 from holding Walmart or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Bank of America
Performance |
| Timeline |
| Walmart |
| Bank of America |
Walmart and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Bank of America
The main advantage of trading using opposite Walmart and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| Bank of America vs. Bank of America | Bank of America vs. Bank of America | Bank of America vs. JPMorgan Chase Co | Bank of America vs. Bank of America |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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