Correlation Between Walmart and Changebridge Capital

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

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

Diversification Opportunities for Walmart and Changebridge Capital

0.9

Correlation Coefficient

Walmart  Changebridge Capital

Almost no diversification

The 3 months correlation between Walmart and Changebridge is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Changebridge Capital Sustainab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changebridge Capital 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 Changebridge Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changebridge Capital has no effect on the direction of Walmart i.e., Walmart and Changebridge Capital go up and down completely randomly.

Pair Corralation between Walmart and Changebridge Capital

Considering the 90-day investment horizon Walmart is expected to generate 0.93 times more return on investment than Changebridge Capital. However, Walmart is 1.08 times less risky than Changebridge Capital. It trades about 0.2 of its potential returns per unit of risk. Changebridge Capital Sustainable is currently generating about 0.11 per unit of risk. If you would invest  5,942  in Walmart on October 12, 2024 and sell it today you would earn a total of  3,238  from holding Walmart or generate 54.49% 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.  Changebridge Capital Sustainab

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.

Changebridge Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Changebridge Capital Sustainable are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Changebridge Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and Changebridge Capital

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

The idea behind Walmart and Changebridge Capital Sustainable 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.