Correlation Between Walmart and First Bancorp

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

Diversification Opportunities for Walmart and First Bancorp

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Walmart and First is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Walmart i.e., Walmart and First Bancorp go up and down completely randomly.

Pair Corralation between Walmart and First Bancorp

Considering the 90-day investment horizon Walmart is expected to generate 1.47 times more return on investment than First Bancorp. However, Walmart is 1.47 times more volatile than First Bancorp. It trades about 0.01 of its potential returns per unit of risk. First Bancorp is currently generating about 0.01 per unit of risk. If you would invest  13,196  in Walmart on May 17, 2022 and sell it today you would earn a total of  26.00  from holding Walmart or generate 0.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.2%
ValuesDaily Returns

Walmart  vs.  First Bancorp

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The new stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart Price Channel

First Bancorp 
First Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in First Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, First Bancorp may actually be approaching a critical reversion point that can send shares even higher in September 2022.

First Price Channel

Walmart and First Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and First Bancorp

The main advantage of trading using opposite Walmart and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, First Bancorp 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 First Bancorp will offset losses from the drop in First Bancorp's long position.
The idea behind Walmart and First Bancorp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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