Correlation Between Walmart and AmmPower Corp

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

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

Diversification Opportunities for Walmart and AmmPower Corp

-0.1

Correlation Coefficient

Walmart  AmmPower Corp

Good diversification

The 3 months correlation between Walmart and AmmPower is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and AmmPower Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmmPower Corp 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 AmmPower Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmmPower Corp has no effect on the direction of Walmart i.e., Walmart and AmmPower Corp go up and down completely randomly.

Pair Corralation between Walmart and AmmPower Corp

Considering the 90-day investment horizon Walmart is expected to under-perform the AmmPower Corp. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 6.96 times less risky than AmmPower Corp. The stock trades about -0.05 of its potential returns per unit of risk. The AmmPower Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3.10  in AmmPower Corp on December 29, 2024 and sell it today you would lose (1.17) from holding AmmPower Corp or give up 37.74% of portfolio value over 90 days.

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

Walmart  vs.  AmmPower Corp

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 comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

AmmPower Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days AmmPower Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AmmPower Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and AmmPower Corp

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

The idea behind Walmart and AmmPower Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.