Correlation Between Walmart and SIERRA METALS

Can any of the company-specific risk be diversified away by investing in both Walmart and SIERRA METALS 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 SIERRA METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and SIERRA METALS, you can compare the effects of market volatilities on Walmart and SIERRA METALS 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 SIERRA METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and SIERRA METALS.

Diversification Opportunities for Walmart and SIERRA METALS

0.66

Correlation Coefficient

Walmart  SIERRA METALS

Poor diversification

The 3 months correlation between Walmart and SIERRA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and SIERRA METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA METALS 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 are associated (or correlated) with SIERRA METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA METALS has no effect on the direction of Walmart i.e., Walmart and SIERRA METALS go up and down completely randomly.

Pair Corralation between Walmart and SIERRA METALS

Assuming the 90 days trading horizon Walmart is expected to under-perform the SIERRA METALS. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 1.6 times less risky than SIERRA METALS. The stock trades about -0.07 of its potential returns per unit of risk. The SIERRA METALS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  54.00  in SIERRA METALS on December 25, 2024 and sell it today you would lose (2.00) from holding SIERRA METALS or give up 3.7% of portfolio value over 90 days.

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

Walmart  vs.  SIERRA METALS

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SIERRA METALS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Walmart and SIERRA METALS

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

The idea behind Walmart and SIERRA METALS 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.