Correlation Between Walmart and Converge Technology

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

Diversification Opportunities for Walmart and Converge Technology

0.6

Correlation Coefficient

Walmart  Converge Technology

Poor diversification

The 3 months correlation between Walmart and Converge is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology 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 Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of Walmart i.e., Walmart and Converge Technology go up and down completely randomly.

Pair Corralation between Walmart and Converge Technology

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.27 times more return on investment than Converge Technology. However, Walmart Inc CDR is 3.76 times less risky than Converge Technology. It trades about 0.14 of its potential returns per unit of risk. Converge Technology Solutions is currently generating about 0.04 per unit of risk. If you would invest  1,988  in Walmart Inc CDR on December 2, 2024 and sell it today you would earn a total of  2,283  from holding Walmart Inc CDR or generate 114.84% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Converge Technology Solutions

Walmart Inc CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Converge Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Converge Technology Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Converge Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Converge Technology

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

The idea behind Walmart Inc CDR and Converge Technology Solutions 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.