Correlation Between Walmart and Kinnevik Investment

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

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

Diversification Opportunities for Walmart and Kinnevik Investment

-0.27

Correlation Coefficient

Walmart  Kinnevik Investment

Very good diversification

The 3 months correlation between Walmart and Kinnevik is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Walmart i.e., Walmart and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Walmart and Kinnevik Investment

Assuming the 90 days trading horizon Walmart is expected to generate 4.05 times less return on investment than Kinnevik Investment. But when comparing it to its historical volatility, Walmart is 48.54 times less risky than Kinnevik Investment. It trades about 0.13 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,046  in Kinnevik Investment AB on October 9, 2024 and sell it today you would lose (3.00) from holding Kinnevik Investment AB or give up 0.04% of portfolio value over 90 days.

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

Walmart  vs.  Kinnevik Investment AB

Walmart

Risk-Adjusted Performance

10 of 100

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Kinnevik Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinnevik Investment AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kinnevik Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and Kinnevik Investment

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

The idea behind Walmart and Kinnevik Investment AB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.