Correlation Between Plaza Retail and Walmart

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

By analyzing existing cross correlation between Plaza Retail REIT and Walmart Inc CDR, you can compare the effects of market volatilities on Plaza Retail and Walmart 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 Plaza Retail with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plaza Retail and Walmart.

Diversification Opportunities for Plaza Retail and Walmart

-0.85

Correlation Coefficient

Plaza Retail  Walmart

Pay attention - limited upside

The 3 months correlation between Plaza and Walmart is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR and Plaza Retail 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 Plaza Retail REIT are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart Inc CDR has no effect on the direction of Plaza Retail i.e., Plaza Retail and Walmart go up and down completely randomly.

Pair Corralation between Plaza Retail and Walmart

Assuming the 90 days trading horizon Plaza Retail REIT is expected to under-perform the Walmart. But the stock apears to be less risky and, when comparing its historical volatility, Plaza Retail REIT is 1.69 times less risky than Walmart. The stock trades about -0.18 of its potential returns per unit of risk. The Walmart Inc CDR is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,442  in Walmart Inc CDR on September 18, 2024 and sell it today you would earn a total of  680.00  from holding Walmart Inc CDR or generate 19.76% return on investment over 90 days.

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

Plaza Retail REIT  vs.  Walmart Inc CDR

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Walmart Inc CDR

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plaza Retail and Walmart

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

The idea behind Plaza Retail REIT and Walmart Inc CDR 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.