Correlation Between Walmart and Emera Pref

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

Diversification Opportunities for Walmart and Emera Pref

0.41

Correlation Coefficient

Walmart  Emera Pref

Very weak diversification

The 3 months correlation between Walmart and Emera is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Emera Pref A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref A 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 Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref A has no effect on the direction of Walmart i.e., Walmart and Emera Pref go up and down completely randomly.

Pair Corralation between Walmart and Emera Pref

Assuming the 90 days trading horizon Walmart is expected to generate 1.21 times less return on investment than Emera Pref. In addition to that, Walmart is 1.38 times more volatile than Emera Pref A. It trades about 0.19 of its total potential returns per unit of risk. Emera Pref A is currently generating about 0.32 per unit of volatility. If you would invest  1,509  in Emera Pref A on October 26, 2024 and sell it today you would earn a total of  247.00  from holding Emera Pref A or generate 16.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Walmart Inc CDR  vs.  Emera Pref A

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 unfluctuating basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Emera Pref A

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref A are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Emera Pref sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Emera Pref

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

The idea behind Walmart Inc CDR and Emera Pref A 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.