Correlation Between Walmart and EnLink

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

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

Diversification Opportunities for Walmart and EnLink

-0.77

Correlation Coefficient

Walmart  EnLink

Pay attention - limited upside

The 3 months correlation between Walmart and EnLink is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and EnLink Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnLink Midstream Partners 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 EnLink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnLink Midstream Partners has no effect on the direction of Walmart i.e., Walmart and EnLink go up and down completely randomly.

Pair Corralation between Walmart and EnLink

Considering the 90-day investment horizon Walmart is expected to generate 0.45 times more return on investment than EnLink. However, Walmart is 2.22 times less risky than EnLink. It trades about 0.27 of its potential returns per unit of risk. EnLink Midstream Partners is currently generating about -0.11 per unit of risk. If you would invest  7,717  in Walmart on September 3, 2024 and sell it today you would earn a total of  1,533  from holding Walmart or generate 19.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.06%
Values	Daily Returns

Walmart  vs.  EnLink Midstream Partners

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

EnLink Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnLink Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for EnLink Midstream Partners investors.

Pair Trading with Walmart and EnLink

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

The idea behind Walmart and EnLink Midstream Partners 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.