Correlation Between Walmart and Western Asset

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

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

Diversification Opportunities for Walmart and Western Asset

0.33

Correlation Coefficient

Walmart  Western Asset

Weak diversification

The 3 months correlation between Walmart and Western is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Walmart i.e., Walmart and Western Asset go up and down completely randomly.

Pair Corralation between Walmart and Western Asset

Considering the 90-day investment horizon Walmart is expected to generate 1.11 times more return on investment than Western Asset. However, Walmart is 1.11 times more volatile than Western Asset High. It trades about -0.05 of its potential returns per unit of risk. Western Asset High 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  Western Asset High

Walmart

Risk-Adjusted Performance

18 of 100

Good

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.

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Walmart and Western Asset

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

The idea behind Walmart and Western Asset High 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.