Correlation Between Walmart and Surge Components

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

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

Diversification Opportunities for Walmart and Surge Components

-0.71

Correlation Coefficient

Walmart  Surge Components

Pay attention - limited upside

The 3 months correlation between Walmart and Surge is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Surge Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Components 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 Surge Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Components has no effect on the direction of Walmart i.e., Walmart and Surge Components go up and down completely randomly.

Pair Corralation between Walmart and Surge Components

Considering the 90-day investment horizon Walmart is expected to generate 0.36 times more return on investment than Surge Components. However, Walmart is 2.76 times less risky than Surge Components. It trades about 0.18 of its potential returns per unit of risk. Surge Components is currently generating about -0.02 per unit of risk. If you would invest  5,889  in Walmart on October 22, 2024 and sell it today you would earn a total of  3,305  from holding Walmart or generate 56.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.56%
Values	Daily Returns

Walmart  vs.  Surge Components

Walmart

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Surge Components

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Components has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Surge Components is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and Surge Components

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

The idea behind Walmart and Surge Components 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.