Correlation Between Walmart and Outback Goldfields

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

Diversification Opportunities for Walmart and Outback Goldfields

-0.31

Correlation Coefficient

Walmart  Outback Goldfields

Very good diversification

The 3 months correlation between Walmart and Outback is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Outback Goldfields Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outback Goldfields 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 Outback Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outback Goldfields Corp has no effect on the direction of Walmart i.e., Walmart and Outback Goldfields go up and down completely randomly.

Pair Corralation between Walmart and Outback Goldfields

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.14 times more return on investment than Outback Goldfields. However, Walmart Inc CDR is 7.28 times less risky than Outback Goldfields. It trades about 0.13 of its potential returns per unit of risk. Outback Goldfields Corp is currently generating about 0.01 per unit of risk. If you would invest  2,071  in Walmart Inc CDR on October 12, 2024 and sell it today you would earn a total of  1,900  from holding Walmart Inc CDR or generate 91.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Walmart Inc CDR  vs.  Outback Goldfields Corp

Walmart Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Outback Goldfields Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outback Goldfields Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Walmart and Outback Goldfields

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

The idea behind Walmart Inc CDR and Outback Goldfields Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.