Correlation Between Walmart and Birchcliff Energy

Can any of the company-specific risk be diversified away by investing in both Walmart and Birchcliff Energy 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 Birchcliff Energy 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 Birchcliff Energy, you can compare the effects of market volatilities on Walmart and Birchcliff Energy 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 Birchcliff Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Birchcliff Energy.

Diversification Opportunities for Walmart and Birchcliff Energy

-0.04

Correlation Coefficient

Walmart  Birchcliff Energy

Good diversification

The 3 months correlation between Walmart and Birchcliff is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Birchcliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchcliff Energy 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 Birchcliff Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchcliff Energy has no effect on the direction of Walmart i.e., Walmart and Birchcliff Energy go up and down completely randomly.

Pair Corralation between Walmart and Birchcliff Energy

Assuming the 90 days trading horizon Walmart is expected to generate 1.4 times less return on investment than Birchcliff Energy. But when comparing it to its historical volatility, Walmart Inc CDR is 2.1 times less risky than Birchcliff Energy. It trades about 0.17 of its potential returns per unit of risk. Birchcliff Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  519.00  in Birchcliff Energy on October 23, 2024 and sell it today you would earn a total of  78.00  from holding Birchcliff Energy or generate 15.03% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Birchcliff Energy

Walmart Inc CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Birchcliff Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Birchcliff Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Birchcliff Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Birchcliff Energy

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

The idea behind Walmart Inc CDR and Birchcliff Energy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.