Correlation Between Walmart and Terns Pharmaceuticals

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

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

Diversification Opportunities for Walmart and Terns Pharmaceuticals

-0.66

Correlation Coefficient

Walmart  Terns Pharmaceuticals

Excellent diversification

The 3 months correlation between Walmart and Terns is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Walmart i.e., Walmart and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between Walmart and Terns Pharmaceuticals

Considering the 90-day investment horizon Walmart is expected to generate 0.25 times more return on investment than Terns Pharmaceuticals. However, Walmart is 4.04 times less risky than Terns Pharmaceuticals. It trades about -0.14 of its potential returns per unit of risk. Terns Pharmaceuticals is currently generating about -0.13 per unit of risk. If you would invest  9,362  in Walmart on October 8, 2024 and sell it today you would lose (284.00) from holding Walmart or give up 3.03% of portfolio value over 90 days.

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

Walmart  vs.  Terns Pharmaceuticals

Walmart

Risk-Adjusted Performance

16 of 100

Solid

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 inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Walmart and Terns Pharmaceuticals

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

The idea behind Walmart and Terns Pharmaceuticals 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.