Correlation Between Walmart and MicroSectors Solactive
Can any of the company-specific risk be diversified away by investing in both Walmart and MicroSectors Solactive 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 MicroSectors Solactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and MicroSectors Solactive FANG, you can compare the effects of market volatilities on Walmart and MicroSectors Solactive 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 MicroSectors Solactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and MicroSectors Solactive.
Diversification Opportunities for Walmart and MicroSectors Solactive
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and MicroSectors is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and MicroSectors Solactive FANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Solactive 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 MicroSectors Solactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Solactive has no effect on the direction of Walmart i.e., Walmart and MicroSectors Solactive go up and down completely randomly.
Pair Corralation between Walmart and MicroSectors Solactive
Considering the 90-day investment horizon Walmart is expected to generate 1.08 times less return on investment than MicroSectors Solactive. But when comparing it to its historical volatility, Walmart is 4.4 times less risky than MicroSectors Solactive. It trades about 0.41 of its potential returns per unit of risk. MicroSectors Solactive FANG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 15,074 in MicroSectors Solactive FANG on August 26, 2024 and sell it today you would earn a total of 1,237 from holding MicroSectors Solactive FANG or generate 8.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. MicroSectors Solactive FANG
Performance |
| Timeline |
| Walmart |
| MicroSectors Solactive |
Walmart and MicroSectors Solactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and MicroSectors Solactive
The main advantage of trading using opposite Walmart and MicroSectors Solactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, MicroSectors Solactive 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 MicroSectors Solactive will offset losses from the drop in MicroSectors Solactive's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| MicroSectors Solactive vs. MicroSectors FANG Index | MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. Direxion Daily Semiconductor |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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