Correlation Between Walmart and B of A

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

Diversification Opportunities for Walmart and B of A

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Walmart and B of A is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Bank Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of America 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 B of A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of America has no effect on the direction of Walmart i.e., Walmart and B of A go up and down completely randomly.

Pair Corralation between Walmart and B of A

Considering the 90-day investment horizon Walmart is expected to generate 4.37 times less return on investment than B of A. In addition to that, Walmart is 1.1 times more volatile than Bank Of America. It trades about 0.09 of its total potential returns per unit of risk. Bank Of America is currently generating about 0.41 per unit of volatility. If you would invest  3,013  in Bank Of America on May 15, 2022 and sell it today you would earn a total of  617.00  from holding Bank Of America or generate 20.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  Bank Of America

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
0 of 100
Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Walmart Price Channel

Bank Of America 
B of A Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Walmart and B of A Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and B of A

The main advantage of trading using opposite Walmart and B of A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, B of A 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 B of A will offset losses from the drop in B of A's long position.
The idea behind Walmart and Bank Of America 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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