Correlation Between Walmart and Ocean Biomedical

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Can any of the company-specific risk be diversified away by investing in both Walmart and Ocean Biomedical 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 Ocean Biomedical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Ocean Biomedical, you can compare the effects of market volatilities on Walmart and Ocean Biomedical 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 Ocean Biomedical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Ocean Biomedical.

Diversification Opportunities for Walmart and Ocean Biomedical

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Walmart and Ocean is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Ocean Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Biomedical 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 Ocean Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Biomedical has no effect on the direction of Walmart i.e., Walmart and Ocean Biomedical go up and down completely randomly.

Pair Corralation between Walmart and Ocean Biomedical

Considering the 90-day investment horizon Walmart is expected to generate 0.08 times more return on investment than Ocean Biomedical. However, Walmart is 12.45 times less risky than Ocean Biomedical. It trades about 0.2 of its potential returns per unit of risk. Ocean Biomedical is currently generating about 0.01 per unit of risk. If you would invest  7,953  in Walmart on October 8, 2024 and sell it today you would earn a total of  1,125  from holding Walmart or generate 14.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy92.06%
ValuesDaily Returns

Walmart  vs.  Ocean Biomedical

 Performance 
       Timeline  
Walmart 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.
Ocean Biomedical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ocean Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady basic indicators, Ocean Biomedical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Walmart and Ocean Biomedical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and Ocean Biomedical

The main advantage of trading using opposite Walmart and Ocean Biomedical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Ocean Biomedical 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 Ocean Biomedical will offset losses from the drop in Ocean Biomedical's long position.
The idea behind Walmart and Ocean Biomedical 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.
Check out your portfolio center.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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