Correlation Between Walmart and Spectral Cap

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

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

Diversification Opportunities for Walmart and Spectral Cap

-0.4

Correlation Coefficient

Walmart  Spectral Cap

Very good diversification

The 3 months correlation between Walmart and Spectral is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Spectral Cap Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectral Cap Corp 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 Spectral Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectral Cap Corp has no effect on the direction of Walmart i.e., Walmart and Spectral Cap go up and down completely randomly.

Pair Corralation between Walmart and Spectral Cap

Considering the 90-day investment horizon Walmart is expected to generate 1.65 times less return on investment than Spectral Cap. But when comparing it to its historical volatility, Walmart is 5.84 times less risky than Spectral Cap. It trades about 0.3 of its potential returns per unit of risk. Spectral Cap Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  380.00  in Spectral Cap Corp on September 20, 2024 and sell it today you would earn a total of  90.00  from holding Spectral Cap Corp or generate 23.68% return on investment over 90 days.

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

Walmart  vs.  Spectral Cap Corp

Walmart

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 23 (%) 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.

Spectral Cap Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spectral Cap Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Spectral Cap displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Spectral Cap

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

The idea behind Walmart and Spectral Cap Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.