Correlation Between Walmart and GEORGIA

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

By analyzing existing cross correlation between Walmart and GEORGIA PWR 325, you can compare the effects of market volatilities on Walmart and GEORGIA 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 GEORGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and GEORGIA.

Diversification Opportunities for Walmart and GEORGIA

-0.61

Correlation Coefficient

Walmart  GEORGIA

Excellent diversification

The 3 months correlation between Walmart and GEORGIA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and GEORGIA PWR 325 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEORGIA PWR 325 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 GEORGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEORGIA PWR 325 has no effect on the direction of Walmart i.e., Walmart and GEORGIA go up and down completely randomly.

Pair Corralation between Walmart and GEORGIA

Considering the 90-day investment horizon Walmart is expected to generate 0.68 times more return on investment than GEORGIA. However, Walmart is 1.46 times less risky than GEORGIA. It trades about 0.23 of its potential returns per unit of risk. GEORGIA PWR 325 is currently generating about -0.05 per unit of risk. If you would invest  8,056  in Walmart on September 14, 2024 and sell it today you would earn a total of  1,369  from holding Walmart or generate 16.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.63%
Values	Daily Returns

Walmart  vs.  GEORGIA PWR 325

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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.

GEORGIA PWR 325

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEORGIA PWR 325 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GEORGIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and GEORGIA

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

The idea behind Walmart and GEORGIA PWR 325 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.