Correlation Between Walmart and Livewire Ergogenics

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

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

Diversification Opportunities for Walmart and Livewire Ergogenics

-0.66

Correlation Coefficient

Walmart  Livewire Ergogenics

Excellent diversification

The 3 months correlation between Walmart and Livewire is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Livewire Ergogenics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livewire Ergogenics 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 Livewire Ergogenics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livewire Ergogenics has no effect on the direction of Walmart i.e., Walmart and Livewire Ergogenics go up and down completely randomly.

Pair Corralation between Walmart and Livewire Ergogenics

Considering the 90-day investment horizon Walmart is expected to generate 0.12 times more return on investment than Livewire Ergogenics. However, Walmart is 8.12 times less risky than Livewire Ergogenics. It trades about 0.25 of its potential returns per unit of risk. Livewire Ergogenics is currently generating about -0.02 per unit of risk. If you would invest  7,966  in Walmart on September 12, 2024 and sell it today you would earn a total of  1,489  from holding Walmart or generate 18.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Walmart  vs.  Livewire Ergogenics

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.

Livewire Ergogenics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livewire Ergogenics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Walmart and Livewire Ergogenics

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

The idea behind Walmart and Livewire Ergogenics 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.