Correlation Between Walmart and CGN Power

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

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

Diversification Opportunities for Walmart and CGN Power

-0.23

Correlation Coefficient

Walmart  CGN Power

Very good diversification

The 3 months correlation between Walmart and CGN is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and CGN Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN Power and Walmart 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 Walmart are associated (or correlated) with CGN Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN Power has no effect on the direction of Walmart i.e., Walmart and CGN Power go up and down completely randomly.

Pair Corralation between Walmart and CGN Power

Assuming the 90 days horizon Walmart is expected to under-perform the CGN Power. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 1.69 times less risky than CGN Power. The stock trades about -0.01 of its potential returns per unit of risk. The CGN Power Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  32.00  in CGN Power Co on October 8, 2024 and sell it today you would earn a total of  0.00  from holding CGN Power Co or generate 0.0% return on investment over 90 days.

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

Walmart  vs.  CGN Power Co

Walmart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

CGN Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGN Power Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CGN Power is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and CGN Power

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

The idea behind Walmart and CGN Power Co 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.

Check out your portfolio center.

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.