Correlation Between Walmart and ECGI Holdings

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

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

Diversification Opportunities for Walmart and ECGI Holdings

-0.54

Correlation Coefficient

Walmart  ECGI Holdings

Excellent diversification

The 3 months correlation between Walmart and ECGI is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ECGI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECGI Holdings 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 ECGI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECGI Holdings has no effect on the direction of Walmart i.e., Walmart and ECGI Holdings go up and down completely randomly.

Pair Corralation between Walmart and ECGI Holdings

Considering the 90-day investment horizon Walmart is expected to generate 8.31 times less return on investment than ECGI Holdings. But when comparing it to its historical volatility, Walmart is 20.17 times less risky than ECGI Holdings. It trades about 0.14 of its potential returns per unit of risk. ECGI Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5.40  in ECGI Holdings on October 11, 2024 and sell it today you would lose (5.30) from holding ECGI Holdings or give up 98.15% of portfolio value over 90 days.

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

Walmart  vs.  ECGI Holdings

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) 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.

ECGI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECGI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady technical and fundamental indicators, ECGI Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and ECGI Holdings

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

The idea behind Walmart and ECGI Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.