Correlation Between Walmart and 1st Capital

Can any of the company-specific risk be diversified away by investing in both Walmart and 1st Capital 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 1st Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and 1st Capital Bank, you can compare the effects of market volatilities on Walmart and 1st Capital 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 1st Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and 1st Capital.

Diversification Opportunities for Walmart and 1st Capital

-0.47

Correlation Coefficient

Walmart  1st Capital

Very good diversification

The 3 months correlation between Walmart and 1st is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and 1st Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Capital Bank 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 1st Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Capital Bank has no effect on the direction of Walmart i.e., Walmart and 1st Capital go up and down completely randomly.

Pair Corralation between Walmart and 1st Capital

Considering the 90-day investment horizon Walmart is expected to generate 0.8 times more return on investment than 1st Capital. However, Walmart is 1.24 times less risky than 1st Capital. It trades about 0.02 of its potential returns per unit of risk. 1st Capital Bank is currently generating about -0.3 per unit of risk. If you would invest  6,000  in Walmart on January 30, 2024 and sell it today you would earn a total of  16.00  from holding Walmart or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Walmart  vs.  1st Capital Bank

Walmart

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

1st Capital Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1st Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Walmart and 1st Capital

The main advantage of trading using opposite Walmart and 1st Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, 1st Capital 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 1st Capital will offset losses from the drop in 1st Capital's long position.

The idea behind Walmart and 1st Capital Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.