Correlation Between Walmart and Schiehallion

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

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

Diversification Opportunities for Walmart and Schiehallion

0.76

Correlation Coefficient

Walmart  Schiehallion

Poor diversification

The 3 months correlation between Walmart and Schiehallion is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Schiehallion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schiehallion 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 Schiehallion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schiehallion has no effect on the direction of Walmart i.e., Walmart and Schiehallion go up and down completely randomly.

Pair Corralation between Walmart and Schiehallion

Assuming the 90 days trading horizon Walmart is expected to generate 5.96 times more return on investment than Schiehallion. However, Walmart is 5.96 times more volatile than Schiehallion. It trades about 0.05 of its potential returns per unit of risk. Schiehallion is currently generating about 0.02 per unit of risk. If you would invest  4,310  in Walmart on September 28, 2024 and sell it today you would earn a total of  1,650  from holding Walmart or generate 38.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Walmart  vs.  Schiehallion

Walmart

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Walmart is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Schiehallion

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schiehallion are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Schiehallion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Schiehallion

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

The idea behind Walmart and Schiehallion 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.