Correlation Between Walmart and Dolby Laboratories
Can any of the company-specific risk be diversified away by investing in both Walmart and Dolby Laboratories 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 Dolby Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Dolby Laboratories, you can compare the effects of market volatilities on Walmart and Dolby Laboratories 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 Dolby Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Dolby Laboratories.
Diversification Opportunities for Walmart and Dolby Laboratories
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Dolby is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Dolby Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolby Laboratories 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 Dolby Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolby Laboratories has no effect on the direction of Walmart i.e., Walmart and Dolby Laboratories go up and down completely randomly.
Pair Corralation between Walmart and Dolby Laboratories
Considering the 90-day investment horizon Walmart is expected to generate 1.35 times less return on investment than Dolby Laboratories. But when comparing it to its historical volatility, Walmart is 3.26 times less risky than Dolby Laboratories. It trades about 0.34 of its potential returns per unit of risk. Dolby Laboratories is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,300 in Dolby Laboratories on August 27, 2024 and sell it today you would earn a total of 730.00 from holding Dolby Laboratories or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Dolby Laboratories
Performance |
| Timeline |
| Walmart |
| Dolby Laboratories |
Walmart and Dolby Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Dolby Laboratories
The main advantage of trading using opposite Walmart and Dolby Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Dolby Laboratories 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 Dolby Laboratories will offset losses from the drop in Dolby Laboratories' long position.| Walmart vs. Innovative Food Hldg | Walmart vs. Calavo Growers | Walmart vs. The Chefs Warehouse | Walmart vs. AMCON Distributing |
| Dolby Laboratories vs. Maximus | Dolby Laboratories vs. Network 1 Technologies | Dolby Laboratories vs. First Advantage Corp | Dolby Laboratories vs. BrightView Holdings |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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