Correlation Between Walmart and Invictus Energy

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

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

Diversification Opportunities for Walmart and Invictus Energy

0.3

Correlation Coefficient

Walmart  Invictus Energy

Weak diversification

The 3 months correlation between Walmart and Invictus is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Invictus Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invictus 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 Invictus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invictus Energy has no effect on the direction of Walmart i.e., Walmart and Invictus Energy go up and down completely randomly.

Pair Corralation between Walmart and Invictus Energy

Considering the 90-day investment horizon Walmart is expected to under-perform the Invictus Energy. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 5.11 times less risky than Invictus Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Invictus Energy Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.25  in Invictus Energy Limited on December 29, 2024 and sell it today you would earn a total of  0.04  from holding Invictus Energy Limited or generate 0.94% return on investment over 90 days.

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

Walmart  vs.  Invictus Energy Limited

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

Invictus Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invictus Energy Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Invictus Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Invictus Energy

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

The idea behind Walmart and Invictus Energy Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.