Correlation Between Walmart and Fabxx
Can any of the company-specific risk be diversified away by investing in both Walmart and Fabxx 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 Fabxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Fabxx, you can compare the effects of market volatilities on Walmart and Fabxx 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 Fabxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Fabxx.
Diversification Opportunities for Walmart and Fabxx
Very good diversification
The 3 months correlation between Walmart and Fabxx is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Fabxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabxx 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 Fabxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabxx has no effect on the direction of Walmart i.e., Walmart and Fabxx go up and down completely randomly.
Pair Corralation between Walmart and Fabxx
Considering the 90-day investment horizon Walmart is expected to generate 0.16 times more return on investment than Fabxx. However, Walmart is 6.36 times less risky than Fabxx. It trades about -0.02 of its potential returns per unit of risk. Fabxx is currently generating about -0.14 per unit of risk. If you would invest 9,729 in Walmart on November 29, 2024 and sell it today you would lose (109.00) from holding Walmart or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Fabxx
Performance |
| Timeline |
| Walmart |
| Fabxx |
Walmart and Fabxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Fabxx
The main advantage of trading using opposite Walmart and Fabxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Fabxx 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 Fabxx will offset losses from the drop in Fabxx's long position.| Walmart vs. Aquagold International | Walmart vs. Thrivent High Yield | Walmart vs. Morningstar Unconstrained Allocation | Walmart vs. Via Renewables |
| Fabxx vs. Global Diversified Income | Fabxx vs. Massmutual Premier Diversified | Fabxx vs. American Funds Conservative | Fabxx vs. Guidepath Conservative Income |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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