Correlation Between Walmart and GENERAL

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

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

Diversification Opportunities for Walmart and GENERAL

0.19

Correlation Coefficient

Walmart  GENERAL

Average diversification

The 3 months correlation between Walmart and GENERAL is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and GENERAL DYNAMICS PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL DYNAMICS PORATION 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL DYNAMICS PORATION has no effect on the direction of Walmart i.e., Walmart and GENERAL go up and down completely randomly.

Pair Corralation between Walmart and GENERAL

Considering the 90-day investment horizon Walmart is expected to generate 1.49 times more return on investment than GENERAL. However, Walmart is 1.49 times more volatile than GENERAL DYNAMICS PORATION. It trades about 0.08 of its potential returns per unit of risk. GENERAL DYNAMICS PORATION is currently generating about -0.24 per unit of risk. If you would invest  7,881  in Walmart on July 12, 2024 and sell it today you would earn a total of  159.00  from holding Walmart or generate 2.02% return on investment over 90 days.

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

Walmart  vs.  GENERAL DYNAMICS PORATION

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

GENERAL DYNAMICS PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL DYNAMICS PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and GENERAL

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

The idea behind Walmart and GENERAL DYNAMICS PORATION 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.