Correlation Between Walmart and Karsten SA

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

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

Diversification Opportunities for Walmart and Karsten SA

0.88

Correlation Coefficient

Walmart  Karsten SA

Very poor diversification

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

Pair Corralation between Walmart and Karsten SA

Assuming the 90 days trading horizon Walmart is expected to generate 0.83 times more return on investment than Karsten SA. However, Walmart is 1.2 times less risky than Karsten SA. It trades about 0.21 of its potential returns per unit of risk. Karsten SA is currently generating about 0.07 per unit of risk. If you would invest  2,293  in Walmart on September 23, 2024 and sell it today you would earn a total of  1,193  from holding Walmart or generate 52.03% return on investment over 90 days.

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

Walmart  vs.  Karsten SA

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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.

Karsten SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karsten SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Karsten SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Karsten SA

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

The idea behind Walmart and Karsten SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.