Correlation Between Walmart and Flight Centre
Can any of the company-specific risk be diversified away by investing in both Walmart and Flight Centre 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 Flight Centre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Flight Centre Travel, you can compare the effects of market volatilities on Walmart and Flight Centre 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 Flight Centre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Flight Centre.
Diversification Opportunities for Walmart and Flight Centre
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Flight is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Flight Centre Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flight Centre Travel 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 Flight Centre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flight Centre Travel has no effect on the direction of Walmart i.e., Walmart and Flight Centre go up and down completely randomly.
Pair Corralation between Walmart and Flight Centre
Considering the 90-day investment horizon Walmart is expected to generate 0.94 times more return on investment than Flight Centre. However, Walmart is 1.07 times less risky than Flight Centre. It trades about 0.13 of its potential returns per unit of risk. Flight Centre Travel is currently generating about 0.08 per unit of risk. If you would invest 4,725 in Walmart on August 30, 2024 and sell it today you would earn a total of 4,463 from holding Walmart or generate 94.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 87.27% |
| Values | Daily Returns |
Walmart vs. Flight Centre Travel
Performance |
| Timeline |
| Walmart |
| Flight Centre Travel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Walmart and Flight Centre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Flight Centre
The main advantage of trading using opposite Walmart and Flight Centre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Flight Centre 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 Flight Centre will offset losses from the drop in Flight Centre's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| Flight Centre vs. Norwegian Cruise Line | Flight Centre vs. Carnival | Flight Centre vs. Airbnb Inc | Flight Centre vs. Expedia Group |
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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