Correlation Between Walmart and Therma Bright

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

Diversification Opportunities for Walmart and Therma Bright

-0.8

Correlation Coefficient

Walmart  Therma Bright

Pay attention - limited upside

The 3 months correlation between Walmart and Therma is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Therma Bright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therma Bright 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 Therma Bright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therma Bright has no effect on the direction of Walmart i.e., Walmart and Therma Bright go up and down completely randomly.

Pair Corralation between Walmart and Therma Bright

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.09 times more return on investment than Therma Bright. However, Walmart Inc CDR is 10.79 times less risky than Therma Bright. It trades about 0.25 of its potential returns per unit of risk. Therma Bright is currently generating about -0.09 per unit of risk. If you would invest  3,479  in Walmart Inc CDR on September 12, 2024 and sell it today you would earn a total of  630.00  from holding Walmart Inc CDR or generate 18.11% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Therma Bright

Walmart Inc CDR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Therma Bright

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Therma Bright has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Walmart and Therma Bright

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

The idea behind Walmart Inc CDR and Therma Bright 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..