Correlation Between Walmart and OPKO HEALTH

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

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

Diversification Opportunities for Walmart and OPKO HEALTH

0.83

Correlation Coefficient

Walmart  OPKO HEALTH

Very poor diversification

The 3 months correlation between Walmart and OPKO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and OPKO HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPKO HEALTH 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 OPKO HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPKO HEALTH has no effect on the direction of Walmart i.e., Walmart and OPKO HEALTH go up and down completely randomly.

Pair Corralation between Walmart and OPKO HEALTH

Assuming the 90 days trading horizon Walmart is expected to generate 0.96 times more return on investment than OPKO HEALTH. However, Walmart is 1.04 times less risky than OPKO HEALTH. It trades about 0.27 of its potential returns per unit of risk. OPKO HEALTH is currently generating about 0.07 per unit of risk. If you would invest  7,217  in Walmart on October 8, 2024 and sell it today you would earn a total of  1,637  from holding Walmart or generate 22.68% return on investment over 90 days.

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

Walmart  vs.  OPKO HEALTH

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) 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.

OPKO HEALTH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OPKO HEALTH are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, OPKO HEALTH is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and OPKO HEALTH

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

The idea behind Walmart and OPKO HEALTH 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.