Correlation Between Walmart and Ameriwest Lithium

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

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

Diversification Opportunities for Walmart and Ameriwest Lithium

0.09

Correlation Coefficient

Walmart  Ameriwest Lithium

Significant diversification

The 3 months correlation between Walmart and Ameriwest is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Ameriwest Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriwest Lithium 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 Ameriwest Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriwest Lithium has no effect on the direction of Walmart i.e., Walmart and Ameriwest Lithium go up and down completely randomly.

Pair Corralation between Walmart and Ameriwest Lithium

Considering the 90-day investment horizon Walmart is expected to generate 20.04 times less return on investment than Ameriwest Lithium. But when comparing it to its historical volatility, Walmart is 9.6 times less risky than Ameriwest Lithium. It trades about 0.05 of its potential returns per unit of risk. Ameriwest Lithium is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Ameriwest Lithium on November 29, 2024 and sell it today you would earn a total of  5.00  from holding Ameriwest Lithium or generate 45.45% return on investment over 90 days.

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

Walmart  vs.  Ameriwest Lithium

Walmart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Ameriwest Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriwest Lithium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Ameriwest Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Ameriwest Lithium

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

The idea behind Walmart and Ameriwest Lithium 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 Global Correlations module to find global opportunities by holding instruments from different markets.