Correlation Between Walmart and Lizhan Environmental

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

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

Diversification Opportunities for Walmart and Lizhan Environmental

0.0

Correlation Coefficient

Walmart  Lizhan Environmental

Pay attention - limited upside

The 3 months correlation between Walmart and Lizhan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Lizhan Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lizhan Environmental 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 Lizhan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lizhan Environmental has no effect on the direction of Walmart i.e., Walmart and Lizhan Environmental go up and down completely randomly.

Pair Corralation between Walmart and Lizhan Environmental

If you would invest  9,035  in Walmart on October 23, 2024 and sell it today you would earn a total of  273.00  from holding Walmart or generate 3.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Walmart  vs.  Lizhan Environmental

Walmart

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lizhan Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lizhan Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lizhan Environmental is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and Lizhan Environmental

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

The idea behind Walmart and Lizhan Environmental 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.