Correlation Between Walmart and Aerojet Rocketdyne

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

Diversification Opportunities for Walmart and Aerojet Rocketdyne

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Walmart and Aerojet is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne 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 Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of Walmart i.e., Walmart and Aerojet Rocketdyne go up and down completely randomly.

Pair Corralation between Walmart and Aerojet Rocketdyne

Considering the 90-day investment horizon Walmart is expected to generate 2.15 times less return on investment than Aerojet Rocketdyne. But when comparing it to its historical volatility, Walmart is 1.24 times less risky than Aerojet Rocketdyne. It trades about 0.01 of its potential returns per unit of risk. Aerojet Rocketdyne Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,761  in Aerojet Rocketdyne Holdings on September 10, 2022 and sell it today you would earn a total of  628.00  from holding Aerojet Rocketdyne Holdings or generate 13.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  Aerojet Rocketdyne Holdings

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Walmart Price Channel

Aerojet Rocketdyne 
Aerojet Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Aerojet Rocketdyne Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aerojet Rocketdyne exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aerojet Price Channel

Walmart and Aerojet Rocketdyne Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and Aerojet Rocketdyne

The main advantage of trading using opposite Walmart and Aerojet Rocketdyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Aerojet Rocketdyne 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 Aerojet Rocketdyne will offset losses from the drop in Aerojet Rocketdyne's long position.
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The idea behind Walmart and Aerojet Rocketdyne Holdings 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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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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