Correlation Between Labrador Iron and Walmart

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

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

Diversification Opportunities for Labrador Iron and Walmart

-0.7

Correlation Coefficient

Labrador Iron  Walmart

Excellent diversification

The 3 months correlation between Labrador and Walmart is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore 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 Labrador Iron 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 Labrador Iron Ore 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 Labrador Iron i.e., Labrador Iron and Walmart go up and down completely randomly.

Pair Corralation between Labrador Iron and Walmart

Assuming the 90 days trading horizon Labrador Iron Ore is expected to under-perform the Walmart. In addition to that, Labrador Iron is 1.36 times more volatile than Walmart Inc CDR. It trades about -0.01 of its total potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.12 per unit of volatility. If you would invest  2,102  in Walmart Inc CDR on October 3, 2024 and sell it today you would earn a total of  1,823  from holding Walmart Inc CDR or generate 86.73% return on investment over 90 days.

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

Labrador Iron Ore  vs.  Walmart Inc CDR

Labrador Iron Ore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Walmart Inc CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Labrador Iron and Walmart

The main advantage of trading using opposite Labrador Iron and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labrador Iron 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 Labrador Iron Ore 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.