Correlation Between Davis Commodities and Walmart

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

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

Diversification Opportunities for Davis Commodities and Walmart

-0.12

Correlation Coefficient

Davis Commodities  Walmart

Good diversification

The 3 months correlation between Davis and Walmart is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Davis Commodities 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 Davis Commodities Limited 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 has no effect on the direction of Davis Commodities i.e., Davis Commodities and Walmart go up and down completely randomly.

Pair Corralation between Davis Commodities and Walmart

Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the Walmart. In addition to that, Davis Commodities is 1.91 times more volatile than Walmart. It trades about -0.07 of its total potential returns per unit of risk. Walmart is currently generating about -0.04 per unit of volatility. If you would invest  9,032  in Walmart on December 28, 2024 and sell it today you would lose (469.00) from holding Walmart or give up 5.19% of portfolio value over 90 days.

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

Davis Commodities Limited  vs.  Walmart

Davis Commodities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Walmart 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 Davis Commodities and Walmart

The main advantage of trading using opposite Davis Commodities and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Commodities 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 Davis Commodities Limited and Walmart 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.