Correlation Between Strategic Education and Walmart

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

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

Diversification Opportunities for Strategic Education and Walmart

0.89

Correlation Coefficient

Strategic Education  Walmart

Very poor diversification

The 3 months correlation between Strategic and Walmart is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Strategic Education 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 Strategic Education 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 Strategic Education i.e., Strategic Education and Walmart go up and down completely randomly.

Pair Corralation between Strategic Education and Walmart

Assuming the 90 days horizon Strategic Education is expected to under-perform the Walmart. In addition to that, Strategic Education is 1.21 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  8,484  in Walmart on September 25, 2024 and sell it today you would earn a total of  189.00  from holding Walmart or generate 2.23% return on investment over 90 days.

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

Strategic Education  vs.  Walmart

Strategic Education

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education reported solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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 Strategic Education and Walmart

The main advantage of trading using opposite Strategic Education and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Education 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 Strategic Education 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.