Correlation Between Walmart and A1LK34

Can any of the company-specific risk be diversified away by investing in both Walmart and A1LK34 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 A1LK34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and A1LK34, you can compare the effects of market volatilities on Walmart and A1LK34 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 A1LK34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and A1LK34.

Diversification Opportunities for Walmart and A1LK34

0.88

Correlation Coefficient

Walmart  A1LK34

Very poor diversification

The 3 months correlation between Walmart and A1LK34 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and A1LK34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1LK34 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 A1LK34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1LK34 has no effect on the direction of Walmart i.e., Walmart and A1LK34 go up and down completely randomly.

Pair Corralation between Walmart and A1LK34

Assuming the 90 days trading horizon Walmart is expected to generate 3.65 times more return on investment than A1LK34. However, Walmart is 3.65 times more volatile than A1LK34. It trades about 0.05 of its potential returns per unit of risk. A1LK34 is currently generating about 0.06 per unit of risk. If you would invest  1,539  in Walmart on September 26, 2024 and sell it today you would earn a total of  1,967  from holding Walmart or generate 127.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.8%
Values	Daily Returns

Walmart  vs.  A1LK34

Walmart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

A1LK34

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in A1LK34 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, A1LK34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and A1LK34

The main advantage of trading using opposite Walmart and A1LK34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, A1LK34 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 A1LK34 will offset losses from the drop in A1LK34's long position.

The idea behind Walmart and A1LK34 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.