Correlation Between Walmart and Plaza Retail

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

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

Diversification Opportunities for Walmart and Plaza Retail

-0.83

Correlation Coefficient

Walmart  Plaza Retail

Pay attention - limited upside

The 3 months correlation between Walmart and Plaza is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT 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 Inc CDR are associated (or correlated) with Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Walmart i.e., Walmart and Plaza Retail go up and down completely randomly.

Pair Corralation between Walmart and Plaza Retail

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 1.79 times more return on investment than Plaza Retail. However, Walmart is 1.79 times more volatile than Plaza Retail REIT. It trades about 0.24 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about -0.17 per unit of risk. If you would invest  3,518  in Walmart Inc CDR on September 13, 2024 and sell it today you would earn a total of  611.00  from holding Walmart Inc CDR or generate 17.37% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Plaza Retail REIT

Walmart Inc CDR

Risk-Adjusted Performance

18 of 100

Solid

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

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.

Pair Trading with Walmart and Plaza Retail

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

The idea behind Walmart Inc CDR and Plaza Retail REIT 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.