Correlation Between Pentagon I and Walmart

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

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

Diversification Opportunities for Pentagon I and Walmart

-0.75

Correlation Coefficient

Pentagon I  Walmart

Pay attention - limited upside

The 3 months correlation between Pentagon and Walmart is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital 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 Pentagon I 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 Pentagon I Capital 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 Pentagon I i.e., Pentagon I and Walmart go up and down completely randomly.

Pair Corralation between Pentagon I and Walmart

Assuming the 90 days trading horizon Pentagon I Capital is expected to under-perform the Walmart. In addition to that, Pentagon I is 13.04 times more volatile than Walmart Inc CDR. It trades about -0.16 of its total potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.06 per unit of volatility. If you would invest  3,965  in Walmart Inc CDR on September 27, 2024 and sell it today you would earn a total of  51.00  from holding Walmart Inc CDR or generate 1.29% return on investment over 90 days.

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

Pentagon I Capital  vs.  Walmart Inc CDR

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Walmart Inc CDR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 17 (%) 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 Pentagon I and Walmart

The main advantage of trading using opposite Pentagon I and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentagon I 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 Pentagon I Capital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.