Correlation Between Walmart and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both Walmart and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and The Travelers Companies, you can compare the effects of market volatilities on Walmart and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Travelers Companies.
Diversification Opportunities for Walmart and Travelers Companies
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and Travelers is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Walmart i.e., Walmart and Travelers Companies go up and down completely randomly.
Pair Corralation between Walmart and Travelers Companies
Considering the 90-day investment horizon Walmart is expected to generate 0.7 times more return on investment than Travelers Companies. However, Walmart is 1.43 times less risky than Travelers Companies. It trades about 0.24 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.13 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. The Travelers Companies
Performance |
| Timeline |
| Walmart |
| The Travelers Companies |
Walmart and Travelers Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Travelers Companies
The main advantage of trading using opposite Walmart and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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