Correlation Between Walmart and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Walmart and SPDR SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and SPDR SP 500, you can compare the effects of market volatilities on Walmart and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and SPDR SP.
Diversification Opportunities for Walmart and SPDR SP
Very poor diversification
The 3 months correlation between Walmart and SPDR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Walmart i.e., Walmart and SPDR SP go up and down completely randomly.
Pair Corralation between Walmart and SPDR SP
Considering the 90-day investment horizon Walmart is expected to generate 1.32 times more return on investment than SPDR SP. However, Walmart is 1.32 times more volatile than SPDR SP 500. It trades about 0.23 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.11 per unit of risk. If you would invest 6,486 in Walmart on August 23, 2024 and sell it today you would earn a total of 2,320 from holding Walmart or generate 35.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. SPDR SP 500
Performance |
| Timeline |
| Walmart |
| SPDR SP 500 |
Walmart and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and SPDR SP
The main advantage of trading using opposite Walmart and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP'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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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