Correlation Between Walmart and Sendero Resources

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

Diversification Opportunities for Walmart and Sendero Resources

0.1

Correlation Coefficient

Walmart  Sendero Resources

Average diversification

The 3 months correlation between Walmart and Sendero is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Sendero Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sendero Resources 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 Sendero Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sendero Resources Corp has no effect on the direction of Walmart i.e., Walmart and Sendero Resources go up and down completely randomly.

Pair Corralation between Walmart and Sendero Resources

Assuming the 90 days trading horizon Walmart is expected to generate 5.61 times less return on investment than Sendero Resources. But when comparing it to its historical volatility, Walmart Inc CDR is 13.09 times less risky than Sendero Resources. It trades about 0.19 of its potential returns per unit of risk. Sendero Resources Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Sendero Resources Corp on October 20, 2024 and sell it today you would earn a total of  8.00  from holding Sendero Resources Corp or generate 14.55% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Sendero Resources Corp

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

Sendero Resources Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sendero Resources Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sendero Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Sendero Resources

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

The idea behind Walmart Inc CDR and Sendero Resources 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.