Correlation Between Walmart and Special Opportunities

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

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

Diversification Opportunities for Walmart and Special Opportunities

0.87

Correlation Coefficient

Walmart  Special Opportunities

Very poor diversification

The 3 months correlation between Walmart and Special is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Special Opportunities Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Special Opportunities 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 Special Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Special Opportunities has no effect on the direction of Walmart i.e., Walmart and Special Opportunities go up and down completely randomly.

Pair Corralation between Walmart and Special Opportunities

Considering the 90-day investment horizon Walmart is expected to generate 1.52 times more return on investment than Special Opportunities. However, Walmart is 1.52 times more volatile than Special Opportunities Closed. It trades about 0.25 of its potential returns per unit of risk. Special Opportunities Closed is currently generating about 0.3 per unit of risk. If you would invest  7,966  in Walmart on September 12, 2024 and sell it today you would earn a total of  1,489  from holding Walmart or generate 18.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Walmart  vs.  Special Opportunities Closed

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) 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.

Special Opportunities

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Special Opportunities Closed are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unsteady basic indicators, Special Opportunities exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Special Opportunities

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

The idea behind Walmart and Special Opportunities Closed 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 Transaction History module to view history of all your transactions and understand their impact on performance.