Correlation Between Walmart and Intl Star

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

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

Diversification Opportunities for Walmart and Intl Star

-0.51

Correlation Coefficient

Walmart  Intl Star

Excellent diversification

The 3 months correlation between Walmart and Intl is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Intl Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intl Star 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 Intl Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intl Star has no effect on the direction of Walmart i.e., Walmart and Intl Star go up and down completely randomly.

Pair Corralation between Walmart and Intl Star

Considering the 90-day investment horizon Walmart is expected to generate 3.61 times less return on investment than Intl Star. But when comparing it to its historical volatility, Walmart is 12.58 times less risky than Intl Star. It trades about 0.26 of its potential returns per unit of risk. Intl Star is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.11  in Intl Star on September 12, 2024 and sell it today you would earn a total of  0.01  from holding Intl Star or generate 9.09% 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.  Intl Star

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) 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.

Intl Star

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intl Star are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Intl Star unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Intl Star

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

The idea behind Walmart and Intl Star 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.