Correlation Between Walmart and HeadsUp Entertainment

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

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

Diversification Opportunities for Walmart and HeadsUp Entertainment

-0.45

Correlation Coefficient

Walmart  HeadsUp Entertainment

Very good diversification

The 3 months correlation between Walmart and HeadsUp is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and HeadsUp Entertainment Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeadsUp Entertainment 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 HeadsUp Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeadsUp Entertainment has no effect on the direction of Walmart i.e., Walmart and HeadsUp Entertainment go up and down completely randomly.

Pair Corralation between Walmart and HeadsUp Entertainment

Considering the 90-day investment horizon Walmart is expected to generate 2.27 times less return on investment than HeadsUp Entertainment. But when comparing it to its historical volatility, Walmart is 15.25 times less risky than HeadsUp Entertainment. It trades about 0.27 of its potential returns per unit of risk. HeadsUp Entertainment International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.77  in HeadsUp Entertainment International on September 3, 2024 and sell it today you would lose (0.17) from holding HeadsUp Entertainment International or give up 22.08% of portfolio value over 90 days.

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

Walmart  vs.  HeadsUp Entertainment Internat

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

HeadsUp Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HeadsUp Entertainment International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HeadsUp Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and HeadsUp Entertainment

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

The idea behind Walmart and HeadsUp Entertainment International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.