Correlation Between Wal-Mart and STELLA JONES

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

By analyzing existing cross correlation between Wal Mart de Mxico and STELLA JONES INC, you can compare the effects of market volatilities on Wal-Mart and STELLA JONES 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 Wal-Mart with a short position of STELLA JONES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal-Mart and STELLA JONES.

Diversification Opportunities for Wal-Mart and STELLA JONES

-0.91

Correlation Coefficient

Wal-Mart  STELLA JONES

Pay attention - limited upside

The 3 months correlation between Wal-Mart and STELLA is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and STELLA JONES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STELLA JONES INC and Wal-Mart 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 Wal Mart de Mxico are associated (or correlated) with STELLA JONES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STELLA JONES INC has no effect on the direction of Wal-Mart i.e., Wal-Mart and STELLA JONES go up and down completely randomly.

Pair Corralation between Wal-Mart and STELLA JONES

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to generate 1.14 times more return on investment than STELLA JONES. However, Wal-Mart is 1.14 times more volatile than STELLA JONES INC. It trades about 0.25 of its potential returns per unit of risk. STELLA JONES INC is currently generating about 0.03 per unit of risk. If you would invest  250.00  in Wal Mart de Mxico on September 24, 2024 and sell it today you would earn a total of  34.00  from holding Wal Mart de Mxico or generate 13.6% return on investment over 90 days.

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

Wal Mart de Mxico  vs.  STELLA JONES INC

Wal Mart de

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de Mxico are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wal-Mart reported solid returns over the last few months and may actually be approaching a breakup point.

STELLA JONES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wal-Mart and STELLA JONES

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

The idea behind Wal Mart de Mxico and STELLA JONES INC 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.