Correlation Between Walmart and Vecima Networks

Can any of the company-specific risk be diversified away by investing in both Walmart and Vecima Networks 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 Vecima Networks 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 Vecima Networks, you can compare the effects of market volatilities on Walmart and Vecima Networks 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 Vecima Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Vecima Networks.

Diversification Opportunities for Walmart and Vecima Networks

-0.86

Correlation Coefficient

Walmart  Vecima Networks

Pay attention - limited upside

The 3 months correlation between Walmart and Vecima is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Vecima Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vecima Networks 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 Vecima Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vecima Networks has no effect on the direction of Walmart i.e., Walmart and Vecima Networks go up and down completely randomly.

Pair Corralation between Walmart and Vecima Networks

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.41 times more return on investment than Vecima Networks. However, Walmart Inc CDR is 2.42 times less risky than Vecima Networks. It trades about 0.51 of its potential returns per unit of risk. Vecima Networks is currently generating about -0.2 per unit of risk. If you would invest  3,589  in Walmart Inc CDR on September 5, 2024 and sell it today you would earn a total of  479.00  from holding Walmart Inc CDR or generate 13.35% 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.  Vecima Networks

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 unfluctuating basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Vecima Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vecima Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Walmart and Vecima Networks

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

The idea behind Walmart Inc CDR and Vecima Networks 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.