Correlation Between Walmart and Floor Decor
Can any of the company-specific risk be diversified away by investing in both Walmart and Floor Decor 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 Floor Decor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Floor Decor Holdings, you can compare the effects of market volatilities on Walmart and Floor Decor 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 Floor Decor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Floor Decor.
Diversification Opportunities for Walmart and Floor Decor
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Walmart and Floor is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Floor Decor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floor Decor Holdings 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 Floor Decor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floor Decor Holdings has no effect on the direction of Walmart i.e., Walmart and Floor Decor go up and down completely randomly.
Pair Corralation between Walmart and Floor Decor
Considering the 90-day investment horizon Walmart is expected to generate 0.46 times more return on investment than Floor Decor. However, Walmart is 2.18 times less risky than Floor Decor. It trades about 0.16 of its potential returns per unit of risk. Floor Decor Holdings is currently generating about 0.01 per unit of risk. If you would invest 5,161 in Walmart on September 12, 2024 and sell it today you would earn a total of 4,294 from holding Walmart or generate 83.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Floor Decor Holdings
Performance |
| Timeline |
| Walmart |
| Floor Decor Holdings |
Walmart and Floor Decor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Floor Decor
The main advantage of trading using opposite Walmart and Floor Decor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Floor Decor 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 Floor Decor will offset losses from the drop in Floor Decor's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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