Correlation Between Walmart and Forward Water

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

Diversification Opportunities for Walmart and Forward Water

0.05

Correlation Coefficient

Walmart  Forward Water

Significant diversification

The 3 months correlation between Walmart and Forward is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Forward Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Water Techno 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 Forward Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Water Techno has no effect on the direction of Walmart i.e., Walmart and Forward Water go up and down completely randomly.

Pair Corralation between Walmart and Forward Water

Assuming the 90 days trading horizon Walmart Inc CDR is expected to under-perform the Forward Water. But the stock apears to be less risky and, when comparing its historical volatility, Walmart Inc CDR is 4.97 times less risky than Forward Water. The stock trades about -0.04 of its potential returns per unit of risk. The Forward Water Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Forward Water Technologies on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Forward Water Technologies or generate 16.67% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Forward Water Technologies

Walmart Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Walmart is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Forward Water Techno

Risk-Adjusted Performance

Modest

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

Pair Trading with Walmart and Forward Water

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

The idea behind Walmart Inc CDR and Forward Water Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.