Correlation Between Wal Mart and Pan Pacific

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

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

Diversification Opportunities for Wal Mart and Pan Pacific

-0.26

Correlation Coefficient

Wal Mart  Pan Pacific

Very good diversification

The 3 months correlation between Wal and Pan is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International and Wal Mart 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 Wal Mart de are associated (or correlated) with Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of Wal Mart i.e., Wal Mart and Pan Pacific go up and down completely randomly.

Pair Corralation between Wal Mart and Pan Pacific

Assuming the 90 days horizon Wal Mart de is expected to generate 1.56 times more return on investment than Pan Pacific. However, Wal Mart is 1.56 times more volatile than Pan Pacific International. It trades about 0.02 of its potential returns per unit of risk. Pan Pacific International is currently generating about 0.02 per unit of risk. If you would invest  274.00  in Wal Mart de on December 26, 2024 and sell it today you would earn a total of  4.00  from holding Wal Mart de or generate 1.46% return on investment over 90 days.

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

Wal Mart de  vs.  Pan Pacific International

Wal Mart de

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wal Mart is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pan Pacific International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Pan Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wal Mart and Pan Pacific

The main advantage of trading using opposite Wal Mart and Pan Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal Mart position performs unexpectedly, Pan Pacific 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 Pan Pacific will offset losses from the drop in Pan Pacific's long position.

The idea behind Wal Mart de and Pan Pacific International 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.