Correlation Between Walmart and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both Walmart and SPDR SSGA 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 SPDR SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and SPDR SSGA Small, you can compare the effects of market volatilities on Walmart and SPDR SSGA 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 SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and SPDR SSGA.
Diversification Opportunities for Walmart and SPDR SSGA
Poor diversification
The 3 months correlation between Walmart and SPDR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and SPDR SSGA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Small has no effect on the direction of Walmart i.e., Walmart and SPDR SSGA go up and down completely randomly.
Pair Corralation between Walmart and SPDR SSGA
Considering the 90-day investment horizon Walmart is expected to generate 1.27 times less return on investment than SPDR SSGA. But when comparing it to its historical volatility, Walmart is 2.21 times less risky than SPDR SSGA. It trades about 0.37 of its potential returns per unit of risk. SPDR SSGA Small is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 12,529 in SPDR SSGA Small on August 25, 2024 and sell it today you would earn a total of 1,377 from holding SPDR SSGA Small or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. SPDR SSGA Small
Performance |
| Timeline |
| Walmart |
| SPDR SSGA Small |
Walmart and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and SPDR SSGA
The main advantage of trading using opposite Walmart and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, SPDR SSGA 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 SPDR SSGA will offset losses from the drop in SPDR SSGA's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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