Correlation Between Walmart and Alpha

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

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

Diversification Opportunities for Walmart and Alpha

-0.8

Correlation Coefficient

Walmart  Alpha

Pay attention - limited upside

The 3 months correlation between Walmart and Alpha is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega 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 Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Walmart i.e., Walmart and Alpha go up and down completely randomly.

Pair Corralation between Walmart and Alpha

Considering the 90-day investment horizon Walmart is expected to generate 0.26 times more return on investment than Alpha. However, Walmart is 3.87 times less risky than Alpha. It trades about -0.05 of its potential returns per unit of risk. Alpha and Omega is currently generating about -0.15 per unit of risk. If you would invest  6,057  in Walmart on January 24, 2024 and sell it today you would lose (43.00) from holding Walmart or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Walmart  vs.  Alpha and Omega

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Alpha and Omega

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha and Omega has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Walmart and Alpha

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

The idea behind Walmart and Alpha and Omega 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.