Correlation Between Walmart and Exco Technologies

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

Diversification Opportunities for Walmart and Exco Technologies

-0.27

Correlation Coefficient

Walmart  Exco Technologies

Very good diversification

The 3 months correlation between Walmart and Exco is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of Walmart i.e., Walmart and Exco Technologies go up and down completely randomly.

Pair Corralation between Walmart and Exco Technologies

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.77 times more return on investment than Exco Technologies. However, Walmart Inc CDR is 1.3 times less risky than Exco Technologies. It trades about 0.21 of its potential returns per unit of risk. Exco Technologies Limited is currently generating about 0.02 per unit of risk. If you would invest  2,233  in Walmart Inc CDR on September 28, 2024 and sell it today you would earn a total of  1,783  from holding Walmart Inc CDR or generate 79.85% 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.  Exco Technologies Limited

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.

Exco Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exco Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Exco Technologies is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walmart and Exco Technologies

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

The idea behind Walmart Inc CDR and Exco Technologies Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.