Correlation Between Caribbean Utilities and Walmart

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

By analyzing existing cross correlation between Caribbean Utilities and Walmart Inc CDR, you can compare the effects of market volatilities on Caribbean Utilities and Walmart 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 Caribbean Utilities with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribbean Utilities and Walmart.

Diversification Opportunities for Caribbean Utilities and Walmart

0.09

Correlation Coefficient

Caribbean Utilities  Walmart

Significant diversification

The 3 months correlation between Caribbean and Walmart is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR and Caribbean Utilities 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 Caribbean Utilities are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart Inc CDR has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Walmart go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Walmart

Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 6.88 times less return on investment than Walmart. But when comparing it to its historical volatility, Caribbean Utilities is 1.07 times less risky than Walmart. It trades about 0.03 of its potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,979  in Walmart Inc CDR on September 24, 2024 and sell it today you would earn a total of  1,023  from holding Walmart Inc CDR or generate 34.34% return on investment over 90 days.

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

Caribbean Utilities  vs.  Walmart Inc CDR

Caribbean Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Walmart Inc CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribbean Utilities and Walmart

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

The idea behind Caribbean Utilities and Walmart Inc CDR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.