Correlation Between Walmart and Spectrum Brands
Can any of the company-specific risk be diversified away by investing in both Walmart and Spectrum Brands 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 Spectrum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Spectrum Brands Holdings, you can compare the effects of market volatilities on Walmart and Spectrum Brands 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 Spectrum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Spectrum Brands.
Diversification Opportunities for Walmart and Spectrum Brands
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Walmart and Spectrum is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Spectrum Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Brands Holdings 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 Spectrum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Brands Holdings has no effect on the direction of Walmart i.e., Walmart and Spectrum Brands go up and down completely randomly.
Pair Corralation between Walmart and Spectrum Brands
Considering the 90-day investment horizon Walmart is expected to generate 0.45 times more return on investment than Spectrum Brands. However, Walmart is 2.22 times less risky than Spectrum Brands. It trades about -0.25 of its potential returns per unit of risk. Spectrum Brands Holdings is currently generating about -0.24 per unit of risk. If you would invest 6,125 in Walmart on January 20, 2024 and sell it today you would lose (199.00) from holding Walmart or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Walmart vs. Spectrum Brands Holdings
Performance |
| Timeline |
| Walmart |
| Spectrum Brands Holdings |
Walmart and Spectrum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Spectrum Brands
The main advantage of trading using opposite Walmart and Spectrum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Spectrum Brands 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 Spectrum Brands will offset losses from the drop in Spectrum Brands' long position.| Walmart vs. Aquagold International | Walmart vs. Morningstar Unconstrained Allocation | Walmart vs. Thrivent High Yield | Walmart vs. Via Renewables |
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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 the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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