Correlation Between Walmart and Lundin Mining

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

Diversification Opportunities for Walmart and Lundin Mining

-0.52

Correlation Coefficient

Walmart  Lundin Mining

Excellent diversification

The 3 months correlation between Walmart and Lundin is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining 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 Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining has no effect on the direction of Walmart i.e., Walmart and Lundin Mining go up and down completely randomly.

Pair Corralation between Walmart and Lundin Mining

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.6 times more return on investment than Lundin Mining. However, Walmart Inc CDR is 1.65 times less risky than Lundin Mining. It trades about 0.18 of its potential returns per unit of risk. Lundin Mining is currently generating about -0.3 per unit of risk. If you would invest  3,835  in Walmart Inc CDR on September 22, 2024 and sell it today you would earn a total of  167.00  from holding Walmart Inc CDR or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Walmart Inc CDR  vs.  Lundin Mining

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.

Lundin Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Walmart and Lundin Mining

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

The idea behind Walmart Inc CDR and Lundin Mining 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.