Correlation Between Walmart and Pan Pacific

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

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

Diversification Opportunities for Walmart and Pan Pacific

0.43

Correlation Coefficient

Walmart  Pan Pacific

Very weak diversification

The 3 months correlation between Walmart and Pan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International 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 Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of Walmart i.e., Walmart and Pan Pacific go up and down completely randomly.

Pair Corralation between Walmart and Pan Pacific

Assuming the 90 days trading horizon Walmart is expected to under-perform the Pan Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 9.46 times less risky than Pan Pacific. The stock trades about -0.03 of its potential returns per unit of risk. The Pan Pacific International is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,510  in Pan Pacific International on September 29, 2024 and sell it today you would earn a total of  1,110  from holding Pan Pacific International or generate 73.51% return on investment over 90 days.

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

Walmart  vs.  Pan Pacific International

Walmart

Risk-Adjusted Performance

19 of 100

Solid

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

Pan Pacific International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pan Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Pan Pacific

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

The idea behind Walmart and Pan Pacific International 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.