Correlation Between Walmart and EJF Investments

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

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

Diversification Opportunities for Walmart and EJF Investments

0.82

Correlation Coefficient

Walmart  EJF Investments

Very poor diversification

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

Pair Corralation between Walmart and EJF Investments

Assuming the 90 days trading horizon Walmart is expected to generate 21.61 times less return on investment than EJF Investments. But when comparing it to its historical volatility, Walmart is 17.92 times less risky than EJF Investments. It trades about 0.13 of its potential returns per unit of risk. EJF Investments is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11,047  in EJF Investments on October 8, 2024 and sell it today you would earn a total of  853.00  from holding EJF Investments or generate 7.72% return on investment over 90 days.

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

Walmart  vs.  EJF Investments

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

EJF Investments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EJF Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EJF Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and EJF Investments

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

The idea behind Walmart and EJF Investments 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.