Correlation Between Walmart and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Walmart and ProShares UltraShort 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 ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and ProShares UltraShort Consumer, you can compare the effects of market volatilities on Walmart and ProShares UltraShort 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 ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and ProShares UltraShort.
Diversification Opportunities for Walmart and ProShares UltraShort
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Walmart and ProShares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ProShares UltraShort Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Walmart i.e., Walmart and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Walmart and ProShares UltraShort
Considering the 90-day investment horizon Walmart is expected to generate 0.86 times more return on investment than ProShares UltraShort. However, Walmart is 1.16 times less risky than ProShares UltraShort. It trades about 0.54 of its potential returns per unit of risk. ProShares UltraShort Consumer is currently generating about -0.23 per unit of risk. If you would invest 8,195 in Walmart on September 1, 2024 and sell it today you would earn a total of 1,055 from holding Walmart or generate 12.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Walmart vs. ProShares UltraShort Consumer
Performance |
| Timeline |
| Walmart |
| ProShares UltraShort |
Walmart and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and ProShares UltraShort
The main advantage of trading using opposite Walmart and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.| Walmart vs. Ingles Markets Incorporated | Walmart vs. Sendas Distribuidora SA | Walmart vs. Grocery Outlet Holding | Walmart vs. Ocado Group plc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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