Correlation Between Walmart and News Corp

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

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

Diversification Opportunities for Walmart and News Corp

0.73

Correlation Coefficient

Walmart  News Corp

Poor diversification

The 3 months correlation between Walmart and News is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and News Corp A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News Corp A 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 News Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News Corp A has no effect on the direction of Walmart i.e., Walmart and News Corp go up and down completely randomly.

Pair Corralation between Walmart and News Corp

Considering the 90-day investment horizon Walmart is expected to generate 0.59 times more return on investment than News Corp. However, Walmart is 1.7 times less risky than News Corp. It trades about -0.12 of its potential returns per unit of risk. News Corp A is currently generating about -0.21 per unit of risk. If you would invest  6,086  in Walmart on January 16, 2024 and sell it today you would lose (93.00) from holding Walmart or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  News Corp A

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) 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.

News Corp A

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in News Corp A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, News Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and News Corp

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

The idea behind Walmart and News Corp A 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.