Correlation Between Walmart and SMC Entertainment

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

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

Diversification Opportunities for Walmart and SMC Entertainment

-0.02

Correlation Coefficient

Walmart  SMC Entertainment

Good diversification

The 3 months correlation between Walmart and SMC is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment 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 SMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Entertainment has no effect on the direction of Walmart i.e., Walmart and SMC Entertainment go up and down completely randomly.

Pair Corralation between Walmart and SMC Entertainment

Considering the 90-day investment horizon Walmart is expected to under-perform the SMC Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 6.48 times less risky than SMC Entertainment. The stock trades about -0.07 of its potential returns per unit of risk. The SMC Entertainment is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.16  in SMC Entertainment on December 26, 2024 and sell it today you would earn a total of  0.05  from holding SMC Entertainment or generate 31.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Walmart  vs.  SMC Entertainment

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 unsteady 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.

SMC Entertainment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Entertainment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, SMC Entertainment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and SMC Entertainment

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

The idea behind Walmart and SMC Entertainment 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.