Correlation Between Walmart and Appili Therapeutics

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

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

Diversification Opportunities for Walmart and Appili Therapeutics

0.32

Correlation Coefficient

Walmart  Appili Therapeutics

Weak diversification

The 3 months correlation between Walmart and Appili is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Appili Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appili Therapeutics 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 Inc CDR are associated (or correlated) with Appili Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appili Therapeutics has no effect on the direction of Walmart i.e., Walmart and Appili Therapeutics go up and down completely randomly.

Pair Corralation between Walmart and Appili Therapeutics

Assuming the 90 days trading horizon Walmart is expected to generate 2.19 times less return on investment than Appili Therapeutics. But when comparing it to its historical volatility, Walmart Inc CDR is 8.83 times less risky than Appili Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Appili Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Appili Therapeutics on October 10, 2024 and sell it today you would lose (2.50) from holding Appili Therapeutics or give up 41.67% of portfolio value over 90 days.

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

Walmart Inc CDR  vs.  Appili Therapeutics

Walmart Inc CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Appili Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Appili Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Appili Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Appili Therapeutics

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

The idea behind Walmart Inc CDR and Appili Therapeutics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.