Correlation Between Walmart and Seafarer Exploration

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

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

Diversification Opportunities for Walmart and Seafarer Exploration

-0.61

Correlation Coefficient

Walmart  Seafarer Exploration

Excellent diversification

The 3 months correlation between Walmart and Seafarer is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Seafarer Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Exploration 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 Seafarer Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Exploration has no effect on the direction of Walmart i.e., Walmart and Seafarer Exploration go up and down completely randomly.

Pair Corralation between Walmart and Seafarer Exploration

Considering the 90-day investment horizon Walmart is expected to generate 7.78 times less return on investment than Seafarer Exploration. But when comparing it to its historical volatility, Walmart is 5.2 times less risky than Seafarer Exploration. It trades about 0.12 of its potential returns per unit of risk. Seafarer Exploration is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Seafarer Exploration on October 26, 2024 and sell it today you would earn a total of  0.06  from holding Seafarer Exploration or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Walmart  vs.  Seafarer Exploration

Walmart

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) 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.

Seafarer Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seafarer Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic 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 Seafarer Exploration

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

The idea behind Walmart and Seafarer Exploration 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.