Correlation Between Walmart and Headwater Gold

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

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

Diversification Opportunities for Walmart and Headwater Gold

0.11

Correlation Coefficient

Walmart  Headwater Gold

Average diversification

The 3 months correlation between Walmart and Headwater is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Headwater Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Gold 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 Headwater Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Gold has no effect on the direction of Walmart i.e., Walmart and Headwater Gold go up and down completely randomly.

Pair Corralation between Walmart and Headwater Gold

Considering the 90-day investment horizon Walmart is expected to under-perform the Headwater Gold. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 4.63 times less risky than Headwater Gold. The stock trades about -0.05 of its potential returns per unit of risk. The Headwater Gold is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Headwater Gold on December 30, 2024 and sell it today you would lose (2.00) from holding Headwater Gold or give up 13.33% of portfolio value over 90 days.

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

Walmart  vs.  Headwater Gold

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.

Headwater Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Headwater Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Headwater Gold 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 Headwater Gold

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

The idea behind Walmart and Headwater Gold 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.