Correlation Between Pan Pacific and Walmart

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

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

Diversification Opportunities for Pan Pacific and Walmart

0.42

Correlation Coefficient

Pan Pacific  Walmart

Very weak diversification

The 3 months correlation between Pan and Walmart is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Pan Pacific International and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Pan Pacific 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 Pan Pacific International 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 Pan Pacific i.e., Pan Pacific and Walmart go up and down completely randomly.

Pair Corralation between Pan Pacific and Walmart

Assuming the 90 days horizon Pan Pacific International is expected to generate 6.64 times more return on investment than Walmart. However, Pan Pacific is 6.64 times more volatile than Walmart. It trades about 0.15 of its potential returns per unit of risk. Walmart is currently generating about 0.29 per unit of risk. If you would invest  1,523  in Pan Pacific International on October 6, 2024 and sell it today you would earn a total of  1,157  from holding Pan Pacific International or generate 75.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Pan Pacific International  vs.  Walmart

Pan Pacific International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pan Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Pacific and Walmart

The main advantage of trading using opposite Pan Pacific and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan Pacific 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 Pan Pacific International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.