Correlation Between Walmart and PetroFrontier Corp

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

Diversification Opportunities for Walmart and PetroFrontier Corp

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Walmart and PetroFrontier is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and PetroFrontier Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroFrontier 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 PetroFrontier Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroFrontier Corp has no effect on the direction of Walmart i.e., Walmart and PetroFrontier Corp go up and down completely randomly.

Pair Corralation between Walmart and PetroFrontier Corp

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.06 times more return on investment than PetroFrontier Corp. However, Walmart Inc CDR is 16.28 times less risky than PetroFrontier Corp. It trades about 0.19 of its potential returns per unit of risk. PetroFrontier Corp is currently generating about 0.0 per unit of risk. If you would invest  3,588  in Walmart Inc CDR on October 25, 2024 and sell it today you would earn a total of  456.00  from holding Walmart Inc CDR or generate 12.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.36%
ValuesDaily Returns

Walmart Inc CDR  vs.  PetroFrontier Corp

 Performance 
       Timeline  
Walmart Inc CDR 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
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 abnormal basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.
PetroFrontier Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PetroFrontier Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, PetroFrontier Corp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Walmart and PetroFrontier Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and PetroFrontier Corp

The main advantage of trading using opposite Walmart and PetroFrontier Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, PetroFrontier Corp 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 PetroFrontier Corp will offset losses from the drop in PetroFrontier Corp's long position.
The idea behind Walmart Inc CDR and PetroFrontier 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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