Correlation Between Walmart and Tamarack Valley

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

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

Diversification Opportunities for Walmart and Tamarack Valley

0.12

Correlation Coefficient

Walmart  Tamarack Valley

Average diversification

The 3 months correlation between Walmart and Tamarack is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Tamarack Valley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamarack Valley Energy 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 Tamarack Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamarack Valley Energy has no effect on the direction of Walmart i.e., Walmart and Tamarack Valley go up and down completely randomly.

Pair Corralation between Walmart and Tamarack Valley

Considering the 90-day investment horizon Walmart is expected to generate 0.86 times more return on investment than Tamarack Valley. However, Walmart is 1.16 times less risky than Tamarack Valley. It trades about -0.05 of its potential returns per unit of risk. Tamarack Valley Energy is currently generating about -0.05 per unit of risk. If you would invest  9,032  in Walmart on December 29, 2024 and sell it today you would lose (517.00) from holding Walmart or give up 5.72% of portfolio value over 90 days.

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

Walmart  vs.  Tamarack Valley Energy

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 comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Tamarack Valley Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tamarack Valley Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tamarack Valley is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and Tamarack Valley

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

The idea behind Walmart and Tamarack Valley Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.