Correlation Between Walmart and American Beacon

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

Diversification Opportunities for Walmart and American Beacon

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Walmart and American is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and American Beacon Mid-Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Mid-Cap 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Mid-Cap has no effect on the direction of Walmart i.e., Walmart and American Beacon go up and down completely randomly.

Pair Corralation between Walmart and American Beacon

Considering the 90-day investment horizon Walmart is expected to generate 5.44 times more return on investment than American Beacon. However, Walmart is 5.44 times more volatile than American Beacon Mid-Cap. It trades about 0.23 of its potential returns per unit of risk. American Beacon Mid-Cap is currently generating about 0.24 per unit of risk. If you would invest  14,073  in Walmart on August 28, 2022 and sell it today you would earn a total of  1,234  from holding Walmart or generate 8.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy77.27%
ValuesDaily Returns

Walmart  vs.  American Beacon Mid-Cap

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 11 (%) 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.

Walmart Price Channel

American Beacon Mid-Cap 
American Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Mid-Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in December 2022.

American Price Channel

Walmart and American Beacon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and American Beacon

The main advantage of trading using opposite Walmart and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.
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The idea behind Walmart and American Beacon Mid-Cap 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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