Correlation Between Walmart and Short Oil

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

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

Diversification Opportunities for Walmart and Short Oil

0.11

Correlation Coefficient

Walmart  Short Oil

Average diversification

The 3 months correlation between Walmart and Short is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Walmart i.e., Walmart and Short Oil go up and down completely randomly.

Pair Corralation between Walmart and Short Oil

Considering the 90-day investment horizon Walmart is expected to generate 1.47 times less return on investment than Short Oil. In addition to that, Walmart is 1.28 times more volatile than Short Oil Gas. It trades about 0.05 of its total potential returns per unit of risk. Short Oil Gas is currently generating about 0.1 per unit of volatility. If you would invest  1,304  in Short Oil Gas on November 29, 2024 and sell it today you would earn a total of  90.00  from holding Short Oil Gas or generate 6.9% return on investment over 90 days.

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

Walmart  vs.  Short Oil Gas

Walmart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Short Oil Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Oil Gas are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Oil may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Walmart and Short Oil

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

The idea behind Walmart and Short Oil Gas 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.