Correlation Between Walmart and MBT Bancshares
Can any of the company-specific risk be diversified away by investing in both Walmart and MBT Bancshares 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 MBT Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and MBT Bancshares, you can compare the effects of market volatilities on Walmart and MBT Bancshares 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 MBT Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and MBT Bancshares.
Diversification Opportunities for Walmart and MBT Bancshares
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and MBT is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and MBT Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBT Bancshares 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 MBT Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBT Bancshares has no effect on the direction of Walmart i.e., Walmart and MBT Bancshares go up and down completely randomly.
Pair Corralation between Walmart and MBT Bancshares
Considering the 90-day investment horizon Walmart is expected to generate 0.3 times more return on investment than MBT Bancshares. However, Walmart is 3.37 times less risky than MBT Bancshares. It trades about 0.13 of its potential returns per unit of risk. MBT Bancshares is currently generating about 0.01 per unit of risk. If you would invest 4,838 in Walmart on August 29, 2024 and sell it today you would earn a total of 4,350 from holding Walmart or generate 89.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 64.52% |
| Values | Daily Returns |
Walmart vs. MBT Bancshares
Performance |
| Timeline |
| Walmart |
| MBT Bancshares |
Walmart and MBT Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and MBT Bancshares
The main advantage of trading using opposite Walmart and MBT Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, MBT Bancshares 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 MBT Bancshares will offset losses from the drop in MBT Bancshares' 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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