Correlation Between Walmart and Tarku Resources

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

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

Diversification Opportunities for Walmart and Tarku Resources

-0.1

Correlation Coefficient

Walmart  Tarku Resources

Good diversification

The 3 months correlation between Walmart and Tarku is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Tarku Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarku Resources 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 Tarku Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarku Resources has no effect on the direction of Walmart i.e., Walmart and Tarku Resources go up and down completely randomly.

Pair Corralation between Walmart and Tarku Resources

Considering the 90-day investment horizon Walmart is expected to under-perform the Tarku Resources. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 2.47 times less risky than Tarku Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Tarku Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.69  in Tarku Resources on December 28, 2024 and sell it today you would lose (0.02) from holding Tarku Resources or give up 2.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Walmart  vs.  Tarku Resources

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.

Tarku Resources

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Walmart and Tarku Resources

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

The idea behind Walmart and Tarku Resources 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.