Correlation Between Wal Mart and Ollies Bargain

Can any of the company-specific risk be diversified away by investing in both Wal Mart and Ollies Bargain 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 Ollies Bargain 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 Ollies Bargain Outlet, you can compare the effects of market volatilities on Wal Mart and Ollies Bargain 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 Ollies Bargain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Ollies Bargain.

Diversification Opportunities for Wal Mart and Ollies Bargain

0.34

Correlation Coefficient

Wal Mart  Ollies Bargain

Weak diversification

The 3 months correlation between Wal and Ollies is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and Ollies Bargain Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ollies Bargain Outlet 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 Ollies Bargain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ollies Bargain Outlet has no effect on the direction of Wal Mart i.e., Wal Mart and Ollies Bargain go up and down completely randomly.

Pair Corralation between Wal Mart and Ollies Bargain

Assuming the 90 days horizon Wal Mart is expected to generate 2.3 times less return on investment than Ollies Bargain. In addition to that, Wal Mart is 1.36 times more volatile than Ollies Bargain Outlet. It trades about 0.02 of its total potential returns per unit of risk. Ollies Bargain Outlet is currently generating about 0.07 per unit of volatility. If you would invest  5,282  in Ollies Bargain Outlet on December 1, 2024 and sell it today you would earn a total of  5,069  from holding Ollies Bargain Outlet or generate 95.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.76%
Values	Daily Returns

Wal Mart de  vs.  Ollies Bargain Outlet

Wal Mart de

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wal Mart de has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Ollies Bargain Outlet

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ollies Bargain Outlet are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Ollies Bargain may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wal Mart and Ollies Bargain

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

The idea behind Wal Mart de and Ollies Bargain Outlet 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.