Correlation Between Walmart and Bridgetown Holdings
Can any of the company-specific risk be diversified away by investing in both Walmart and Bridgetown Holdings 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 Bridgetown Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Bridgetown Holdings, you can compare the effects of market volatilities on Walmart and Bridgetown Holdings 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 Bridgetown Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Bridgetown Holdings.
Diversification Opportunities for Walmart and Bridgetown Holdings
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and Bridgetown is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Bridgetown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgetown Holdings 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 Bridgetown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgetown Holdings has no effect on the direction of Walmart i.e., Walmart and Bridgetown Holdings go up and down completely randomly.
Pair Corralation between Walmart and Bridgetown Holdings
Considering the 90-day investment horizon Walmart is expected to generate 8.61 times more return on investment than Bridgetown Holdings. However, Walmart is 8.61 times more volatile than Bridgetown Holdings. It trades about 0.14 of its potential returns per unit of risk. Bridgetown Holdings is currently generating about 0.21 per unit of risk. If you would invest 4,598 in Walmart on October 25, 2024 and sell it today you would earn a total of 4,725 from holding Walmart or generate 102.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 23.89% |
| Values | Daily Returns |
Walmart vs. Bridgetown Holdings
Performance |
| Timeline |
| Walmart |
| Bridgetown Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Walmart and Bridgetown Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Bridgetown Holdings
The main advantage of trading using opposite Walmart and Bridgetown Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Bridgetown Holdings 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 Bridgetown Holdings will offset losses from the drop in Bridgetown Holdings' long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Dollar General |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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