Correlation Between Walmart and Covalon Technologies

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

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

Diversification Opportunities for Walmart and Covalon Technologies

0.63

Correlation Coefficient

Walmart  Covalon Technologies

Poor diversification

The 3 months correlation between Walmart and Covalon is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies 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 Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Walmart i.e., Walmart and Covalon Technologies go up and down completely randomly.

Pair Corralation between Walmart and Covalon Technologies

Considering the 90-day investment horizon Walmart is expected to generate 1.14 times less return on investment than Covalon Technologies. But when comparing it to its historical volatility, Walmart is 4.09 times less risky than Covalon Technologies. It trades about 0.14 of its potential returns per unit of risk. Covalon Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  165.00  in Covalon Technologies on September 12, 2024 and sell it today you would earn a total of  89.00  from holding Covalon Technologies or generate 53.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Walmart  vs.  Covalon Technologies

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) 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.

Covalon Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covalon Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Covalon Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Covalon Technologies

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

The idea behind Walmart and Covalon Technologies 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.