Correlation Between Walmart and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both Walmart and Lithium Americas 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 Lithium Americas 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 Lithium Americas Corp, you can compare the effects of market volatilities on Walmart and Lithium Americas 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 Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Lithium Americas.
Diversification Opportunities for Walmart and Lithium Americas
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Walmart and Lithium is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Walmart i.e., Walmart and Lithium Americas go up and down completely randomly.
Pair Corralation between Walmart and Lithium Americas
Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.43 times more return on investment than Lithium Americas. However, Walmart Inc CDR is 2.3 times less risky than Lithium Americas. It trades about 0.09 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.11 per unit of risk. If you would invest 3,926 in Walmart Inc CDR on November 22, 2024 and sell it today you would earn a total of 279.00 from holding Walmart Inc CDR or generate 7.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Walmart Inc CDR vs. Lithium Americas Corp
Performance |
Timeline |
Walmart Inc CDR |
Lithium Americas Corp |
Walmart and Lithium Americas Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and Lithium Americas
The main advantage of trading using opposite Walmart and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' long position.Walmart vs. Black Mammoth Metals | ||
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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