Correlation Between Walmart and Sigma Lithium

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

Diversification Opportunities for Walmart and Sigma Lithium

-0.32

Correlation Coefficient

Walmart  Sigma Lithium

Very good diversification

The 3 months correlation between Walmart and Sigma is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Sigma Lithium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Resources 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 Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Resources has no effect on the direction of Walmart i.e., Walmart and Sigma Lithium go up and down completely randomly.

Pair Corralation between Walmart and Sigma Lithium

Assuming the 90 days trading horizon Walmart Inc CDR is expected to under-perform the Sigma Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Walmart Inc CDR is 1.64 times less risky than Sigma Lithium. The stock trades about -0.04 of its potential returns per unit of risk. The Sigma Lithium Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,590  in Sigma Lithium Resources on December 30, 2024 and sell it today you would earn a total of  57.00  from holding Sigma Lithium Resources or generate 3.58% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Sigma Lithium Resources

Walmart Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Sigma Lithium Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Sigma Lithium may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Walmart and Sigma Lithium

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

The idea behind Walmart Inc CDR and Sigma Lithium Resources 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.