Correlation Between Walmart and Cardinal Energy

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

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

Diversification Opportunities for Walmart and Cardinal Energy

-0.15

Correlation Coefficient

Walmart  Cardinal Energy

Good diversification

The 3 months correlation between Walmart and Cardinal is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Energy 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 Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of Walmart i.e., Walmart and Cardinal Energy go up and down completely randomly.

Pair Corralation between Walmart and Cardinal Energy

Considering the 90-day investment horizon Walmart is expected to under-perform the Cardinal Energy. In addition to that, Walmart is 1.14 times more volatile than Cardinal Energy. It trades about -0.05 of its total potential returns per unit of risk. Cardinal Energy is currently generating about 0.01 per unit of volatility. If you would invest  451.00  in Cardinal Energy on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Cardinal Energy or generate 0.22% return on investment over 90 days.

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

Walmart  vs.  Cardinal Energy

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cardinal Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cardinal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cardinal Energy 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 Cardinal Energy

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

The idea behind Walmart and Cardinal Energy 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.