Correlation Between Walmart and IShares Morningstar
Can any of the company-specific risk be diversified away by investing in both Walmart and IShares Morningstar 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 Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and iShares Morningstar Small Cap, you can compare the effects of market volatilities on Walmart and IShares Morningstar 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 Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and IShares Morningstar.
Diversification Opportunities for Walmart and IShares Morningstar
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and iShares Morningstar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar 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 Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of Walmart i.e., Walmart and IShares Morningstar go up and down completely randomly.
Pair Corralation between Walmart and IShares Morningstar
Considering the 90-day investment horizon Walmart is expected to generate 0.73 times more return on investment than IShares Morningstar. However, Walmart is 1.37 times less risky than IShares Morningstar. It trades about 0.49 of its potential returns per unit of risk. iShares Morningstar Small Cap is currently generating about 0.26 per unit of risk. If you would invest 8,170 in Walmart on August 30, 2024 and sell it today you would earn a total of 1,018 from holding Walmart or generate 12.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Walmart vs. iShares Morningstar Small Cap
Performance |
| Timeline |
| Walmart |
| iShares Morningstar |
Walmart and IShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and IShares Morningstar
The main advantage of trading using opposite Walmart and IShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, IShares Morningstar 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 Morningstar will offset losses from the drop in IShares Morningstar's long position.| Walmart vs. Weis Markets | Walmart vs. Ingles Markets Incorporated | Walmart vs. Sendas Distribuidora SA | Walmart vs. Grocery Outlet Holding |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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