Correlation Between Walmart and Sino Biopharmaceutica

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

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

Diversification Opportunities for Walmart and Sino Biopharmaceutica

-0.22

Correlation Coefficient

Walmart  Sino Biopharmaceutica

Very good diversification

The 3 months correlation between Walmart and Sino is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Sino Biopharmaceutical Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical 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 Sino Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Biopharmaceutical has no effect on the direction of Walmart i.e., Walmart and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Walmart and Sino Biopharmaceutica

Considering the 90-day investment horizon Walmart is expected to generate 0.7 times more return on investment than Sino Biopharmaceutica. However, Walmart is 1.43 times less risky than Sino Biopharmaceutica. It trades about 0.07 of its potential returns per unit of risk. Sino Biopharmaceutical Ltd is currently generating about -0.07 per unit of risk. If you would invest  9,330  in Walmart on December 3, 2024 and sell it today you would earn a total of  531.00  from holding Walmart or generate 5.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Walmart  vs.  Sino Biopharmaceutical Ltd

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sino Biopharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sino Biopharmaceutical Ltd 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Walmart and Sino Biopharmaceutica

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

The idea behind Walmart and Sino Biopharmaceutical Ltd 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.