Correlation Between American Express and Walmart

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

Diversification Opportunities for American Express and Walmart

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between American and Walmart is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and American Express 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 American Express 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 American Express i.e., American Express and Walmart go up and down completely randomly.

Pair Corralation between American Express and Walmart

Considering the 90-day investment horizon American Express is expected to generate 8.21 times less return on investment than Walmart. In addition to that, American Express is 1.03 times more volatile than Walmart. It trades about 0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.08 per unit of volatility. If you would invest  12,263  in Walmart on July 1, 2022 and sell it today you would earn a total of  1,048  from holding Walmart or generate 8.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Walmart

 Performance (%) 
       Timeline  
American Express 
American Performance
0 of 100
Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, American Express is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

American Price Channel

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 conflicting primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Walmart Price Channel

American Express and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and Walmart

The main advantage of trading using opposite American Express and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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 American Express 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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