Correlation Between Walmart and Arizona Lithium

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

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

Diversification Opportunities for Walmart and Arizona Lithium

-0.6

Correlation Coefficient

Walmart  Arizona Lithium

Excellent diversification

The 3 months correlation between Walmart and Arizona is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Arizona Lithium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Lithium 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 Arizona Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Lithium has no effect on the direction of Walmart i.e., Walmart and Arizona Lithium go up and down completely randomly.

Pair Corralation between Walmart and Arizona Lithium

Considering the 90-day investment horizon Walmart is expected to generate 1.15 times less return on investment than Arizona Lithium. But when comparing it to its historical volatility, Walmart is 12.26 times less risky than Arizona Lithium. It trades about 0.23 of its potential returns per unit of risk. Arizona Lithium Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1.30  in Arizona Lithium Limited on September 13, 2024 and sell it today you would lose (0.40) from holding Arizona Lithium Limited or give up 30.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Walmart  vs.  Arizona Lithium Limited

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. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arizona Lithium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Lithium Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Arizona Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Arizona Lithium

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

The idea behind Walmart and Arizona Lithium Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.