Correlation Between Walmart and STELLA JONES

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

By analyzing existing cross correlation between Walmart and STELLA JONES INC, you can compare the effects of market volatilities on Walmart and STELLA JONES 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 STELLA JONES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and STELLA JONES.

Diversification Opportunities for Walmart and STELLA JONES

-0.84

Correlation Coefficient

Walmart  STELLA JONES

Pay attention - limited upside

The 3 months correlation between Walmart and STELLA is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and STELLA JONES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STELLA JONES INC 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 STELLA JONES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STELLA JONES INC has no effect on the direction of Walmart i.e., Walmart and STELLA JONES go up and down completely randomly.

Pair Corralation between Walmart and STELLA JONES

Assuming the 90 days horizon Walmart is expected to generate 0.48 times more return on investment than STELLA JONES. However, Walmart is 2.07 times less risky than STELLA JONES. It trades about 0.21 of its potential returns per unit of risk. STELLA JONES INC is currently generating about 0.03 per unit of risk. If you would invest  8,484  in Walmart on September 24, 2024 and sell it today you would earn a total of  412.00  from holding Walmart or generate 4.86% return on investment over 90 days.

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

Walmart  vs.  STELLA JONES INC

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.

STELLA JONES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Walmart and STELLA JONES

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

The idea behind Walmart and STELLA JONES INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.