Correlation Between GUDANG GARAM and Walmart

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

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

Diversification Opportunities for GUDANG GARAM and Walmart

0.27

Correlation Coefficient

GUDANG GARAM  Walmart

Modest diversification

The 3 months correlation between GUDANG and Walmart is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GUDANG GARAM and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and GUDANG GARAM 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 GUDANG GARAM 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 GUDANG GARAM i.e., GUDANG GARAM and Walmart go up and down completely randomly.

Pair Corralation between GUDANG GARAM and Walmart

Assuming the 90 days trading horizon GUDANG GARAM is expected to under-perform the Walmart. In addition to that, GUDANG GARAM is 1.53 times more volatile than Walmart. It trades about -0.18 of its total potential returns per unit of risk. Walmart is currently generating about -0.09 per unit of volatility. If you would invest  8,706  in Walmart on December 30, 2024 and sell it today you would lose (872.00) from holding Walmart or give up 10.02% of portfolio value over 90 days.

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

GUDANG GARAM  vs.  Walmart

GUDANG GARAM

Risk-Adjusted Performance

Very Weak

Over the last 90 days GUDANG GARAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GUDANG GARAM and Walmart

The main advantage of trading using opposite GUDANG GARAM and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GUDANG GARAM 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 GUDANG GARAM 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.