Correlation Between Walmart and First Solar
Can any of the company-specific risk be diversified away by investing in both Walmart and First Solar 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 First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and First Solar, you can compare the effects of market volatilities on Walmart and First Solar 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 First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and First Solar.
Diversification Opportunities for Walmart and First Solar
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Walmart and First is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar 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 First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of Walmart i.e., Walmart and First Solar go up and down completely randomly.
Pair Corralation between Walmart and First Solar
Considering the 90-day investment horizon Walmart is expected to generate 0.31 times more return on investment than First Solar. However, Walmart is 3.21 times less risky than First Solar. It trades about 0.13 of its potential returns per unit of risk. First Solar is currently generating about 0.03 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 Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Walmart vs. First Solar
Performance |
| Timeline |
| Walmart |
| First Solar |
Walmart and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and First Solar
The main advantage of trading using opposite Walmart and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, First Solar 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 First Solar will offset losses from the drop in First Solar's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| First Solar vs. Enphase Energy | First Solar vs. Sunrun Inc | First Solar vs. Canadian Solar | First Solar vs. SolarEdge Technologies |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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