Correlation Between IShares MSCI and Walmart

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Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Walmart 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 IShares MSCI and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares MSCI EAFE and Walmart, you can compare the effects of market volatilities on IShares MSCI and Walmart 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 IShares MSCI with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Walmart.

Diversification Opportunities for IShares MSCI and Walmart

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and Walmart is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IShares MSCI EAFE and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and IShares MSCI 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 IShares MSCI EAFE are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of IShares MSCI i.e., IShares MSCI and Walmart go up and down completely randomly.

Pair Corralation between IShares MSCI and Walmart

Considering the 90-day investment horizon IShares MSCI EAFE is expected to generate 0.89 times more return on investment than Walmart. However, IShares MSCI EAFE is 1.12 times less risky than Walmart. It trades about 0.21 of its potential returns per unit of risk. Walmart is currently generating about 0.14 per unit of risk. If you would invest  6,137  in IShares MSCI EAFE on December 29, 2023 and sell it today you would earn a total of  191.43  from holding IShares MSCI EAFE or generate 3.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

IShares MSCI EAFE  vs.  Walmart

 Performance 
       Timeline  
IShares MSCI EAFE 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in IShares MSCI EAFE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Walmart 

Risk-Adjusted Performance

22 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

IShares MSCI and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares MSCI and Walmart

The main advantage of trading using opposite IShares MSCI and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.
The idea behind IShares MSCI EAFE and Walmart 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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