Correlation Between Walmart and SBA Communications

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

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

Diversification Opportunities for Walmart and SBA Communications

-0.48

Correlation Coefficient

Walmart  SBA Communications

Very good diversification

The 3 months correlation between Walmart and SBA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp 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 SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of Walmart i.e., Walmart and SBA Communications go up and down completely randomly.

Pair Corralation between Walmart and SBA Communications

Considering the 90-day investment horizon Walmart is expected to generate 0.55 times more return on investment than SBA Communications. However, Walmart is 1.8 times less risky than SBA Communications. It trades about 0.08 of its potential returns per unit of risk. SBA Communications Corp is currently generating about -0.03 per unit of risk. If you would invest  4,588  in Walmart on January 26, 2024 and sell it today you would earn a total of  1,399  from holding Walmart or generate 30.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  SBA Communications Corp

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.

SBA Communications Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBA Communications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Walmart and SBA Communications

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

The idea behind Walmart and SBA Communications Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.