Correlation Between Walmart and GM

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

Diversification Opportunities for Walmart and GM

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Walmart and GM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Walmart i.e., Walmart and GM go up and down completely randomly.

Pair Corralation between Walmart and GM

Considering the 90-day investment horizon Walmart is expected to generate 0.53 times more return on investment than GM. However, Walmart is 1.9 times less risky than GM. It trades about -0.14 of its potential returns per unit of risk. General Motors is currently generating about -0.22 per unit of risk. If you would invest  13,587  in Walmart on June 26, 2022 and sell it today you would lose (581.00)  from holding Walmart or give up 4.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  General Motors

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 4 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart Price Channel

General Motors 
GM Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, GM is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

GM Price Channel

Walmart and GM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and GM

The main advantage of trading using opposite Walmart and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.
Walmart vs. BUSHVELD MINERALS LTD
The idea behind Walmart and General Motors 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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