Correlation Between Walmart and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Walmart and Legg Mason 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 Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Legg Mason Partners, you can compare the effects of market volatilities on Walmart and Legg Mason 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 Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Legg Mason.
Diversification Opportunities for Walmart and Legg Mason
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and Legg is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Walmart i.e., Walmart and Legg Mason go up and down completely randomly.
Pair Corralation between Walmart and Legg Mason
Considering the 90-day investment horizon Walmart is expected to generate 0.9 times more return on investment than Legg Mason. However, Walmart is 1.11 times less risky than Legg Mason. It trades about 0.13 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.06 per unit of risk. If you would invest 4,813 in Walmart on September 1, 2024 and sell it today you would earn a total of 4,437 from holding Walmart or generate 92.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Walmart vs. Legg Mason Partners
Performance |
| Timeline |
| Walmart |
| Legg Mason Partners |
Walmart and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Legg Mason
The main advantage of trading using opposite Walmart and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Walmart vs. Ingles Markets Incorporated | Walmart vs. Grocery Outlet Holding | Walmart vs. Ocado Group plc | Walmart vs. Sprouts Farmers Market |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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