Correlation Between Walmart and IShares SP
Can any of the company-specific risk be diversified away by investing in both Walmart and IShares SP 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 IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and iShares SP Small Cap, you can compare the effects of market volatilities on Walmart and IShares SP 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 IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and IShares SP.
Diversification Opportunities for Walmart and IShares SP
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of Walmart i.e., Walmart and IShares SP go up and down completely randomly.
Pair Corralation between Walmart and IShares SP
Considering the 90-day investment horizon Walmart is expected to generate 0.82 times more return on investment than IShares SP. However, Walmart is 1.22 times less risky than IShares SP. It trades about 0.22 of its potential returns per unit of risk. iShares SP Small Cap is currently generating about 0.07 per unit of risk. If you would invest 5,076 in Walmart on August 27, 2024 and sell it today you would earn a total of 3,968 from holding Walmart or generate 78.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. iShares SP Small Cap
Performance |
| Timeline |
| Walmart |
| iShares SP Small |
Walmart and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and IShares SP
The main advantage of trading using opposite Walmart and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, IShares SP 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 IShares SP will offset losses from the drop in IShares SP's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
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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