Correlation Between Walmart and X-FAB Silicon

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

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

Diversification Opportunities for Walmart and X-FAB Silicon

-0.23

Correlation Coefficient

Walmart  X-FAB Silicon

Very good diversification

The 3 months correlation between Walmart and X-FAB is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Walmart i.e., Walmart and X-FAB Silicon go up and down completely randomly.

Pair Corralation between Walmart and X-FAB Silicon

Assuming the 90 days horizon Walmart is expected to generate 0.43 times more return on investment than X-FAB Silicon. However, Walmart is 2.34 times less risky than X-FAB Silicon. It trades about 0.25 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.01 per unit of risk. If you would invest  7,328  in Walmart on October 1, 2024 and sell it today you would earn a total of  1,466  from holding Walmart or generate 20.01% return on investment over 90 days.

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

Walmart  vs.  X FAB Silicon Foundries

Walmart

Risk-Adjusted Performance

19 of 100

Solid

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

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, X-FAB Silicon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walmart and X-FAB Silicon

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

The idea behind Walmart and X FAB Silicon Foundries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.