Correlation Between Walmart and Karora Resources

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

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

Diversification Opportunities for Walmart and Karora Resources

0.73

Correlation Coefficient

Walmart  Karora Resources

Poor diversification

The 3 months correlation between Walmart and Karora is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Karora Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karora Resources 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 Karora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karora Resources has no effect on the direction of Walmart i.e., Walmart and Karora Resources go up and down completely randomly.

Pair Corralation between Walmart and Karora Resources

If you would invest  7,696  in Walmart on September 5, 2024 and sell it today you would earn a total of  1,655  from holding Walmart or generate 21.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Walmart  vs.  Karora Resources

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 inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Karora Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karora Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Karora Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and Karora Resources

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

The idea behind Walmart and Karora Resources 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.