Correlation Between Walmart and Western Sierra
Can any of the company-specific risk be diversified away by investing in both Walmart and Western Sierra 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 Western Sierra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Western Sierra Mining, you can compare the effects of market volatilities on Walmart and Western Sierra 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 Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Western Sierra.
Diversification Opportunities for Walmart and Western Sierra
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Walmart and Western is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Walmart i.e., Walmart and Western Sierra go up and down completely randomly.
Pair Corralation between Walmart and Western Sierra
Considering the 90-day investment horizon Walmart is expected to generate 80.5 times less return on investment than Western Sierra. But when comparing it to its historical volatility, Walmart is 109.28 times less risky than Western Sierra. It trades about 0.16 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7.11 in Western Sierra Mining on August 27, 2024 and sell it today you would lose (6.43) from holding Western Sierra Mining or give up 90.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Western Sierra Mining
Performance |
| Timeline |
| Walmart |
| Western Sierra Mining |
Walmart and Western Sierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Western Sierra
The main advantage of trading using opposite Walmart and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Western Sierra 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 Western Sierra will offset losses from the drop in Western Sierra's long position.| Walmart vs. Innovative Food Hldg | Walmart vs. Calavo Growers | Walmart vs. The Chefs Warehouse | Walmart vs. AMCON Distributing |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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