Correlation Between Walmart and Plumb Equity
Can any of the company-specific risk be diversified away by investing in both Walmart and Plumb Equity 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 Plumb Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Plumb Equity, you can compare the effects of market volatilities on Walmart and Plumb Equity 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 Plumb Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Plumb Equity.
Diversification Opportunities for Walmart and Plumb Equity
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and Plumb is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Plumb Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Equity 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 Plumb Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Equity has no effect on the direction of Walmart i.e., Walmart and Plumb Equity go up and down completely randomly.
Pair Corralation between Walmart and Plumb Equity
Considering the 90-day investment horizon Walmart is expected to generate 1.0 times more return on investment than Plumb Equity. However, Walmart is 1.0 times more volatile than Plumb Equity. It trades about 0.24 of its potential returns per unit of risk. Plumb Equity is currently generating about 0.07 per unit of risk. If you would invest 6,641 in Walmart on September 2, 2024 and sell it today you would earn a total of 2,609 from holding Walmart or generate 39.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Plumb Equity
Performance |
| Timeline |
| Walmart |
| Plumb Equity |
Walmart and Plumb Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Plumb Equity
The main advantage of trading using opposite Walmart and Plumb Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Plumb Equity 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 Plumb Equity will offset losses from the drop in Plumb Equity'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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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