Correlation Between Walmart and ROYAL CANADIAN

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

Diversification Opportunities for Walmart and ROYAL CANADIAN

0.78

Correlation Coefficient

Walmart  ROYAL CANADIAN

Poor diversification

The 3 months correlation between Walmart and ROYAL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and ROYAL CANADIAN MINT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROYAL CANADIAN MINT 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 ROYAL CANADIAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROYAL CANADIAN MINT has no effect on the direction of Walmart i.e., Walmart and ROYAL CANADIAN go up and down completely randomly.

Pair Corralation between Walmart and ROYAL CANADIAN

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.52 times more return on investment than ROYAL CANADIAN. However, Walmart Inc CDR is 1.91 times less risky than ROYAL CANADIAN. It trades about 0.28 of its potential returns per unit of risk. ROYAL CANADIAN MINT is currently generating about 0.1 per unit of risk. If you would invest  3,368  in Walmart Inc CDR on September 4, 2024 and sell it today you would earn a total of  700.00  from holding Walmart Inc CDR or generate 20.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	32.81%
Values	Daily Returns

Walmart Inc CDR  vs.  ROYAL CANADIAN MINT

Walmart Inc CDR

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 21 (%) 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.

ROYAL CANADIAN MINT

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ROYAL CANADIAN MINT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unfluctuating basic indicators, ROYAL CANADIAN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and ROYAL CANADIAN

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

The idea behind Walmart Inc CDR and ROYAL CANADIAN MINT 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..