Correlation Between Future Metals and Walmart

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

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

Diversification Opportunities for Future Metals and Walmart

-0.04

Correlation Coefficient

Future Metals  Walmart

Good diversification

The 3 months correlation between Future and Walmart is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Future Metals 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 Future Metals NL 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 Future Metals i.e., Future Metals and Walmart go up and down completely randomly.

Pair Corralation between Future Metals and Walmart

Assuming the 90 days trading horizon Future Metals NL is expected to under-perform the Walmart. In addition to that, Future Metals is 84.89 times more volatile than Walmart. It trades about -0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.13 per unit of volatility. If you would invest  5,937  in Walmart on December 25, 2024 and sell it today you would earn a total of  23.00  from holding Walmart or generate 0.39% return on investment over 90 days.

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

Future Metals NL  vs.  Walmart

Future Metals NL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Future Metals NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Future Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Walmart

Risk-Adjusted Performance

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.

Pair Trading with Future Metals and Walmart

The main advantage of trading using opposite Future Metals and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Future Metals 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 Future Metals NL 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.