Correlation Between Walmart and Oak Ridge

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

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

Diversification Opportunities for Walmart and Oak Ridge

0.92

Correlation Coefficient

Walmart  Oak Ridge

Almost no diversification

The 3 months correlation between Walmart and Oak is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Oak Ridge Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Financial 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 Oak Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Ridge Financial has no effect on the direction of Walmart i.e., Walmart and Oak Ridge go up and down completely randomly.

Pair Corralation between Walmart and Oak Ridge

Considering the 90-day investment horizon Walmart is expected to generate 1.97 times more return on investment than Oak Ridge. However, Walmart is 1.97 times more volatile than Oak Ridge Financial. It trades about 0.2 of its potential returns per unit of risk. Oak Ridge Financial is currently generating about 0.15 per unit of risk. If you would invest  8,819  in Walmart on September 22, 2024 and sell it today you would earn a total of  405.00  from holding Walmart or generate 4.59% return on investment over 90 days.

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

Walmart  vs.  Oak Ridge Financial

Walmart

Risk-Adjusted Performance

16 of 100

Solid

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.

Oak Ridge Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Ridge Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Oak Ridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Oak Ridge

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

The idea behind Walmart and Oak Ridge Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.