Correlation Between Walmart and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both Walmart and Direxion Shares 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 Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Direxion Shares ETF, you can compare the effects of market volatilities on Walmart and Direxion Shares 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 Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Direxion Shares.
Diversification Opportunities for Walmart and Direxion Shares
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Walmart and Direxion is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of Walmart i.e., Walmart and Direxion Shares go up and down completely randomly.
Pair Corralation between Walmart and Direxion Shares
Considering the 90-day investment horizon Walmart is expected to generate 0.2 times more return on investment than Direxion Shares. However, Walmart is 4.95 times less risky than Direxion Shares. It trades about 0.3 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about -0.13 per unit of risk. If you would invest 7,978 in Walmart on August 28, 2024 and sell it today you would earn a total of 1,153 from holding Walmart or generate 14.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Direxion Shares ETF
Performance |
| Timeline |
| Walmart |
| Direxion Shares ETF |
Walmart and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Direxion Shares
The main advantage of trading using opposite Walmart and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Direxion Shares 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 Direxion Shares will offset losses from the drop in Direxion Shares' 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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