Correlation Between Walmart and WisdomTree Multifactor
Can any of the company-specific risk be diversified away by investing in both Walmart and WisdomTree Multifactor 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 WisdomTree Multifactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and WisdomTree Multifactor, you can compare the effects of market volatilities on Walmart and WisdomTree Multifactor 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 WisdomTree Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and WisdomTree Multifactor.
Diversification Opportunities for Walmart and WisdomTree Multifactor
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Walmart and WisdomTree is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and WisdomTree Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Multifactor 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 WisdomTree Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Multifactor has no effect on the direction of Walmart i.e., Walmart and WisdomTree Multifactor go up and down completely randomly.
Pair Corralation between Walmart and WisdomTree Multifactor
Considering the 90-day investment horizon Walmart is expected to generate 1.28 times more return on investment than WisdomTree Multifactor. However, Walmart is 1.28 times more volatile than WisdomTree Multifactor. It trades about 0.54 of its potential returns per unit of risk. WisdomTree Multifactor is currently generating about 0.42 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. WisdomTree Multifactor
Performance |
| Timeline |
| Walmart |
| WisdomTree Multifactor |
Walmart and WisdomTree Multifactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and WisdomTree Multifactor
The main advantage of trading using opposite Walmart and WisdomTree Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, WisdomTree Multifactor 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 WisdomTree Multifactor will offset losses from the drop in WisdomTree Multifactor's long position.| Walmart vs. Ingles Markets Incorporated | Walmart vs. Sendas Distribuidora SA | Walmart vs. Grocery Outlet Holding | Walmart vs. Ocado Group plc |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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