Correlation Between Walmart and Scandic Hotels

Can any of the company-specific risk be diversified away by investing in both Walmart and Scandic Hotels 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 Scandic Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Scandic Hotels Group, you can compare the effects of market volatilities on Walmart and Scandic Hotels 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 Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Scandic Hotels.

Diversification Opportunities for Walmart and Scandic Hotels

0.04

Correlation Coefficient

Walmart  Scandic Hotels

Significant diversification

The 3 months correlation between Walmart and Scandic is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Walmart i.e., Walmart and Scandic Hotels go up and down completely randomly.

Pair Corralation between Walmart and Scandic Hotels

Assuming the 90 days trading horizon Walmart is expected to generate 37.76 times less return on investment than Scandic Hotels. But when comparing it to its historical volatility, Walmart is 31.35 times less risky than Scandic Hotels. It trades about 0.13 of its potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,768  in Scandic Hotels Group on December 24, 2024 and sell it today you would earn a total of  1,000.00  from holding Scandic Hotels Group or generate 14.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  Scandic Hotels Group

Walmart

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Walmart is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Scandic Hotels Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scandic Hotels Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Scandic Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Scandic Hotels

The main advantage of trading using opposite Walmart and Scandic Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Scandic Hotels 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 Scandic Hotels will offset losses from the drop in Scandic Hotels' long position.

The idea behind Walmart and Scandic Hotels Group 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.