Correlation Between Walmart and Transition Metals

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

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

Diversification Opportunities for Walmart and Transition Metals

-0.5

Correlation Coefficient

Walmart  Transition Metals

Very good diversification

The 3 months correlation between Walmart and Transition is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Transition Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transition Metals Corp 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 Transition Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transition Metals Corp has no effect on the direction of Walmart i.e., Walmart and Transition Metals go up and down completely randomly.

Pair Corralation between Walmart and Transition Metals

Considering the 90-day investment horizon Walmart is expected to under-perform the Transition Metals. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 30.39 times less risky than Transition Metals. The stock trades about -0.05 of its potential returns per unit of risk. The Transition Metals Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3.45  in Transition Metals Corp on December 30, 2024 and sell it today you would earn a total of  0.05  from holding Transition Metals Corp or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Walmart  vs.  Transition Metals Corp

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Transition Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transition Metals Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Transition Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Transition Metals

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

The idea behind Walmart and Transition Metals Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.