Correlation Between Walmart and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both Walmart and Cisco Systems 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 Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Cisco Systems, you can compare the effects of market volatilities on Walmart and Cisco Systems 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 Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Cisco Systems.
Diversification Opportunities for Walmart and Cisco Systems
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Walmart and Cisco is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Walmart i.e., Walmart and Cisco Systems go up and down completely randomly.
Pair Corralation between Walmart and Cisco Systems
Considering the 90-day investment horizon Walmart is expected to generate 0.68 times more return on investment than Cisco Systems. However, Walmart is 1.46 times less risky than Cisco Systems. It trades about -0.06 of its potential returns per unit of risk. Cisco Systems is currently generating about -0.07 per unit of risk. If you would invest 6,057 in Walmart on January 25, 2024 and sell it today you would lose (70.00) from holding Walmart or give up 1.16% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Walmart vs. Cisco Systems
Performance |
Timeline |
Walmart |
Cisco Systems |
Walmart and Cisco Systems Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and Cisco Systems
The main advantage of trading using opposite Walmart and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Big Lots |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |