Correlation Between Walmart and FibraHotel

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

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

Diversification Opportunities for Walmart and FibraHotel

0.64

Correlation Coefficient

Walmart  FibraHotel

Poor diversification

The 3 months correlation between Walmart and FibraHotel is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel 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 FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Walmart i.e., Walmart and FibraHotel go up and down completely randomly.

Pair Corralation between Walmart and FibraHotel

Assuming the 90 days trading horizon Walmart is expected to generate 1.26 times less return on investment than FibraHotel. But when comparing it to its historical volatility, Walmart is 1.86 times less risky than FibraHotel. It trades about 0.22 of its potential returns per unit of risk. FibraHotel is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  818.00  in FibraHotel on September 24, 2024 and sell it today you would earn a total of  183.00  from holding FibraHotel or generate 22.37% return on investment over 90 days.

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

Walmart  vs.  FibraHotel

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

FibraHotel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, FibraHotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and FibraHotel

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

The idea behind Walmart and FibraHotel 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..