Correlation Between Walmart and Neo Battery

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

Diversification Opportunities for Walmart and Neo Battery

0.27

Correlation Coefficient

Walmart  Neo Battery

Modest diversification

The 3 months correlation between Walmart and Neo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Neo Battery Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neo Battery Materials 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 Neo Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neo Battery Materials has no effect on the direction of Walmart i.e., Walmart and Neo Battery go up and down completely randomly.

Pair Corralation between Walmart and Neo Battery

Assuming the 90 days trading horizon Walmart is expected to generate 2.57 times less return on investment than Neo Battery. But when comparing it to its historical volatility, Walmart Inc CDR is 6.47 times less risky than Neo Battery. It trades about 0.04 of its potential returns per unit of risk. Neo Battery Materials is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  88.00  in Neo Battery Materials on November 29, 2024 and sell it today you would lose (14.00) from holding Neo Battery Materials or give up 15.91% of portfolio value over 90 days.

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

Walmart Inc CDR  vs.  Neo Battery Materials

Walmart Inc CDR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Neo Battery Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neo Battery Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Neo Battery may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Walmart and Neo Battery

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

The idea behind Walmart Inc CDR and Neo Battery Materials 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.