Correlation Between Walmart and ASX Limited

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

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

Diversification Opportunities for Walmart and ASX Limited

-0.44

Correlation Coefficient

Walmart  ASX Limited

Very good diversification

The 3 months correlation between Walmart and ASX is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ASX Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited ADR 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 ASX Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited ADR has no effect on the direction of Walmart i.e., Walmart and ASX Limited go up and down completely randomly.

Pair Corralation between Walmart and ASX Limited

Considering the 90-day investment horizon Walmart is expected to generate 1.02 times more return on investment than ASX Limited. However, Walmart is 1.02 times more volatile than ASX Limited ADR. It trades about -0.13 of its potential returns per unit of risk. ASX Limited ADR is currently generating about -0.42 per unit of risk. If you would invest  9,362  in Walmart on October 10, 2024 and sell it today you would lose (281.00) from holding Walmart or give up 3.0% of portfolio value over 90 days.

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

Walmart  vs.  ASX Limited ADR

Walmart

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

ASX Limited ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX Limited ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Walmart and ASX Limited

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

The idea behind Walmart and ASX Limited ADR 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.