Correlation Between Adobe Systems and Walmart

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

Diversification Opportunities for Adobe Systems and Walmart

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Adobe and Walmart is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Adobe Systems 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 Adobe Systems 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 Adobe Systems i.e., Adobe Systems and Walmart go up and down completely randomly.

Pair Corralation between Adobe Systems and Walmart

Given the investment horizon of 90 days Adobe Systems is expected to under-perform the Walmart. In addition to that, Adobe Systems is 3.38 times more volatile than Walmart. It trades about -0.31 of its total potential returns per unit of risk. Walmart is currently generating about 0.0 per unit of volatility. If you would invest  13,255  in Walmart on July 2, 2022 and sell it today you would lose (30.00)  from holding Walmart or give up 0.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Adobe Systems  vs.  Walmart

 Performance (%) 
       Timeline  
Adobe Systems 
Adobe Performance
0 of 100
Over the last 90 days Adobe Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Adobe Price Channel

Walmart 
Walmart Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Walmart Price Channel

Adobe Systems and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adobe Systems and Walmart

The main advantage of trading using opposite Adobe Systems and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems 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.
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The idea behind Adobe Systems 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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