Correlation Between Walmart and Heidelberg Pharma

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

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

Diversification Opportunities for Walmart and Heidelberg Pharma

-0.83

Correlation Coefficient

Walmart  Heidelberg Pharma

Pay attention - limited upside

The 3 months correlation between Walmart and Heidelberg is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Heidelberg Pharma AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Pharma 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 Heidelberg Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Pharma has no effect on the direction of Walmart i.e., Walmart and Heidelberg Pharma go up and down completely randomly.

Pair Corralation between Walmart and Heidelberg Pharma

Assuming the 90 days horizon Walmart is expected to generate 0.53 times more return on investment than Heidelberg Pharma. However, Walmart is 1.89 times less risky than Heidelberg Pharma. It trades about 0.2 of its potential returns per unit of risk. Heidelberg Pharma AG is currently generating about -0.04 per unit of risk. If you would invest  7,699  in Walmart on October 23, 2024 and sell it today you would earn a total of  1,179  from holding Walmart or generate 15.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Walmart  vs.  Heidelberg Pharma AG

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) 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.

Heidelberg Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heidelberg Pharma AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Heidelberg Pharma 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 Heidelberg Pharma

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

The idea behind Walmart and Heidelberg Pharma AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.