Correlation Between Walmart and Nektar Therapeutics

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

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

Diversification Opportunities for Walmart and Nektar Therapeutics

-0.31

Correlation Coefficient

Walmart  Nektar Therapeutics

Very good diversification

The 3 months correlation between Walmart and Nektar is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Nektar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nektar Therapeutics 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 Nektar Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nektar Therapeutics has no effect on the direction of Walmart i.e., Walmart and Nektar Therapeutics go up and down completely randomly.

Pair Corralation between Walmart and Nektar Therapeutics

Considering the 90-day investment horizon Walmart is expected to under-perform the Nektar Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 3.25 times less risky than Nektar Therapeutics. The stock trades about -0.06 of its potential returns per unit of risk. The Nektar Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  93.00  in Nektar Therapeutics on December 20, 2024 and sell it today you would lose (5.67) from holding Nektar Therapeutics or give up 6.1% of portfolio value over 90 days.

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

Walmart  vs.  Nektar Therapeutics

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 latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nektar Therapeutics

Risk-Adjusted Performance

Weak

Over the last 90 days Nektar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nektar Therapeutics is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Walmart and Nektar Therapeutics

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

The idea behind Walmart and Nektar Therapeutics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.