Correlation Between Walmart and Industrial Select
Can any of the company-specific risk be diversified away by investing in both Walmart and Industrial Select 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 Industrial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Industrial Select Sector, you can compare the effects of market volatilities on Walmart and Industrial Select 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 Industrial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Industrial Select.
Diversification Opportunities for Walmart and Industrial Select
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Walmart and Industrial is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Industrial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Select Sector 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 Industrial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Select Sector has no effect on the direction of Walmart i.e., Walmart and Industrial Select go up and down completely randomly.
Pair Corralation between Walmart and Industrial Select
Considering the 90-day investment horizon Walmart is expected to generate 1.19 times more return on investment than Industrial Select. However, Walmart is 1.19 times more volatile than Industrial Select Sector. It trades about 0.16 of its potential returns per unit of risk. Industrial Select Sector is currently generating about 0.08 per unit of risk. If you would invest 4,611 in Walmart on November 19, 2024 and sell it today you would earn a total of 5,793 from holding Walmart or generate 125.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Industrial Select Sector
Performance |
| Timeline |
| Walmart |
| Industrial Select Sector |
Walmart and Industrial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Industrial Select
The main advantage of trading using opposite Walmart and Industrial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Industrial Select 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 Industrial Select will offset losses from the drop in Industrial Select's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select vs. Health Care Select |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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