Correlation Between Walmart and 04010LAV5

Can any of the company-specific risk be diversified away by investing in both Walmart and 04010LAV5 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 04010LAV5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and ARES CAP P, you can compare the effects of market volatilities on Walmart and 04010LAV5 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 04010LAV5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and 04010LAV5.

Diversification Opportunities for Walmart and 04010LAV5

-0.56

Correlation Coefficient

Walmart  04010LAV5

Excellent diversification

The 3 months correlation between Walmart and 04010LAV5 is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ARES CAP P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARES CAP P 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 04010LAV5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARES CAP P has no effect on the direction of Walmart i.e., Walmart and 04010LAV5 go up and down completely randomly.

Pair Corralation between Walmart and 04010LAV5

Considering the 90-day investment horizon Walmart is expected to generate 3.17 times more return on investment than 04010LAV5. However, Walmart is 3.17 times more volatile than ARES CAP P. It trades about 0.26 of its potential returns per unit of risk. ARES CAP P is currently generating about -0.1 per unit of risk. If you would invest  7,723  in Walmart on August 30, 2024 and sell it today you would earn a total of  1,465  from holding Walmart or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Walmart  vs.  ARES CAP P

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

ARES CAP P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARES CAP P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 04010LAV5 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and 04010LAV5

The main advantage of trading using opposite Walmart and 04010LAV5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, 04010LAV5 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 04010LAV5 will offset losses from the drop in 04010LAV5's long position.

The idea behind Walmart and ARES CAP P 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.