Correlation Between Walmart and Twitter

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

Diversification Opportunities for Walmart and Twitter

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Walmart and Twitter is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter 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 Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of Walmart i.e., Walmart and Twitter go up and down completely randomly.

Pair Corralation between Walmart and Twitter

Considering the 90-day investment horizon Walmart is expected to generate 25.08 times less return on investment than Twitter. But when comparing it to its historical volatility, Walmart is 1.5 times less risky than Twitter. It trades about 0.01 of its potential returns per unit of risk. Twitter is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,004  in Twitter on June 30, 2022 and sell it today you would earn a total of  321.00  from holding Twitter or generate 8.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  Twitter

 Performance (%) 
       Timeline  
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

Twitter 
Twitter Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Twitter are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Twitter reported solid returns over the last few months and may actually be approaching a breakup point.

Twitter Price Channel

Walmart and Twitter Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and Twitter

The main advantage of trading using opposite Walmart and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Twitter 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 Twitter will offset losses from the drop in Twitter's long position.
Walmart vs. Amazon Inc
The idea behind Walmart and Twitter 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.
Twitter vs. Tencent Holdings
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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