Correlation Between Walmart and ECN Capital

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

Diversification Opportunities for Walmart and ECN Capital

0.82

Correlation Coefficient

Walmart  ECN Capital

Very poor diversification

The 3 months correlation between Walmart and ECN is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and ECN Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECN Capital Corp 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 ECN Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECN Capital Corp has no effect on the direction of Walmart i.e., Walmart and ECN Capital go up and down completely randomly.

Pair Corralation between Walmart and ECN Capital

Assuming the 90 days trading horizon Walmart is expected to generate 2.34 times less return on investment than ECN Capital. But when comparing it to its historical volatility, Walmart Inc CDR is 2.83 times less risky than ECN Capital. It trades about 0.21 of its potential returns per unit of risk. ECN Capital Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  166.00  in ECN Capital Corp on September 22, 2024 and sell it today you would earn a total of  146.00  from holding ECN Capital Corp or generate 87.95% return on investment over 90 days.

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

Walmart Inc CDR  vs.  ECN Capital Corp

Walmart Inc CDR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 16 (%) 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.

ECN Capital Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECN Capital Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ECN Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and ECN Capital

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

The idea behind Walmart Inc CDR and ECN Capital Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.