Correlation Between Walmart and Exchange Bankshares
Can any of the company-specific risk be diversified away by investing in both Walmart and Exchange Bankshares 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 Exchange Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Exchange Bankshares, you can compare the effects of market volatilities on Walmart and Exchange Bankshares 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 Exchange Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Exchange Bankshares.
Diversification Opportunities for Walmart and Exchange Bankshares
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Exchange is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares 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 Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of Walmart i.e., Walmart and Exchange Bankshares go up and down completely randomly.
Pair Corralation between Walmart and Exchange Bankshares
Considering the 90-day investment horizon Walmart is expected to generate 0.52 times more return on investment than Exchange Bankshares. However, Walmart is 1.94 times less risky than Exchange Bankshares. It trades about 0.51 of its potential returns per unit of risk. Exchange Bankshares is currently generating about 0.24 per unit of risk. If you would invest 8,170 in Walmart on August 30, 2024 and sell it today you would earn a total of 1,018 from holding Walmart or generate 12.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Exchange Bankshares
Performance |
| Timeline |
| Walmart |
| Exchange Bankshares |
Walmart and Exchange Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Exchange Bankshares
The main advantage of trading using opposite Walmart and Exchange Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Exchange Bankshares 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 Exchange Bankshares will offset losses from the drop in Exchange Bankshares' long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| Exchange Bankshares vs. First Community Financial | Exchange Bankshares vs. National Capital Bank | Exchange Bankshares vs. Oakworth Capital | Exchange Bankshares vs. Truxton |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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