Correlation Between Walmart and Melcor Developments

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

Diversification Opportunities for Walmart and Melcor Developments

-0.71

Correlation Coefficient

Walmart  Melcor Developments

Pay attention - limited upside

The 3 months correlation between Walmart and Melcor is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments 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 Melcor Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Developments has no effect on the direction of Walmart i.e., Walmart and Melcor Developments go up and down completely randomly.

Pair Corralation between Walmart and Melcor Developments

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 1.04 times more return on investment than Melcor Developments. However, Walmart is 1.04 times more volatile than Melcor Developments. It trades about 0.21 of its potential returns per unit of risk. Melcor Developments is currently generating about -0.04 per unit of risk. If you would invest  3,441  in Walmart Inc CDR on October 6, 2024 and sell it today you would earn a total of  500.00  from holding Walmart Inc CDR or generate 14.53% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Melcor Developments

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

Melcor Developments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Walmart and Melcor Developments

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

The idea behind Walmart Inc CDR and Melcor Developments 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.