Correlation Between Walmart and Toyota
Can any of the company-specific risk be diversified away by investing in both Walmart and Toyota 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 Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Toyota Motor, you can compare the effects of market volatilities on Walmart and Toyota 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 Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Toyota.
Diversification Opportunities for Walmart and Toyota
Almost no diversification
The 3 months correlation between Walmart and Toyota is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of Walmart i.e., Walmart and Toyota go up and down completely randomly.
Pair Corralation between Walmart and Toyota
Considering the 90-day investment horizon Walmart is expected to generate 0.52 times more return on investment than Toyota. However, Walmart is 1.94 times less risky than Toyota. It trades about -0.05 of its potential returns per unit of risk. Toyota Motor is currently generating about -0.35 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 Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Walmart vs. Toyota Motor
Performance |
Timeline |
Walmart |
Toyota Motor |
Walmart and Toyota Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and Toyota
The main advantage of trading using opposite Walmart and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.Walmart vs. Big Lots | Walmart vs. Aquagold International | Walmart vs. Thrivent High Yield | Walmart vs. Morningstar Unconstrained Allocation |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |