Correlation Between Walmart and Emerita Resources

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

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

Diversification Opportunities for Walmart and Emerita Resources

0.65

Correlation Coefficient

Walmart  Emerita Resources

Poor diversification

The 3 months correlation between Walmart and Emerita is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Emerita Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerita Resources Corp 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 Emerita Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerita Resources Corp has no effect on the direction of Walmart i.e., Walmart and Emerita Resources go up and down completely randomly.

Pair Corralation between Walmart and Emerita Resources

Considering the 90-day investment horizon Walmart is expected to generate 5.13 times less return on investment than Emerita Resources. But when comparing it to its historical volatility, Walmart is 3.7 times less risky than Emerita Resources. It trades about 0.17 of its potential returns per unit of risk. Emerita Resources Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Emerita Resources Corp on December 1, 2024 and sell it today you would earn a total of  61.00  from holding Emerita Resources Corp or generate 148.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.39%
Values	Daily Returns

Walmart  vs.  Emerita Resources Corp

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Emerita Resources Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerita Resources Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Emerita Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Emerita Resources

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

The idea behind Walmart and Emerita Resources Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.