Correlation Between Walmart and Postmedia Network

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

Diversification Opportunities for Walmart and Postmedia Network

-0.59

Correlation Coefficient

Walmart  Postmedia Network

Excellent diversification

The 3 months correlation between Walmart and Postmedia is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Walmart i.e., Walmart and Postmedia Network go up and down completely randomly.

Pair Corralation between Walmart and Postmedia Network

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.19 times more return on investment than Postmedia Network. However, Walmart Inc CDR is 5.21 times less risky than Postmedia Network. It trades about 0.14 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about 0.02 per unit of risk. If you would invest  2,016  in Walmart Inc CDR on October 5, 2024 and sell it today you would earn a total of  1,893  from holding Walmart Inc CDR or generate 93.9% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Postmedia Network Canada

Walmart Inc CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Postmedia Network is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and Postmedia Network

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

The idea behind Walmart Inc CDR and Postmedia Network Canada 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.