Correlation Between Oceaneering International and Walmart
Can any of the company-specific risk be diversified away by investing in both Oceaneering International and Walmart 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 Oceaneering International and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oceaneering International and Walmart, you can compare the effects of market volatilities on Oceaneering International and Walmart 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 Oceaneering International with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oceaneering International and Walmart.
Diversification Opportunities for Oceaneering International and Walmart
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Oceaneering and Walmart is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Oceaneering International and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Oceaneering International 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 Oceaneering International are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Oceaneering International i.e., Oceaneering International and Walmart go up and down completely randomly.
Pair Corralation between Oceaneering International and Walmart
Assuming the 90 days trading horizon Oceaneering International is expected to generate 8.32 times less return on investment than Walmart. But when comparing it to its historical volatility, Oceaneering International is 5.44 times less risky than Walmart. It trades about 0.03 of its potential returns per unit of risk. Walmart is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,328 in Walmart on October 25, 2024 and sell it today you would earn a total of 1,632 from holding Walmart or generate 37.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 85.05% |
| Values | Daily Returns |
Oceaneering International vs. Walmart
Performance |
| Timeline |
| Oceaneering International |
| Walmart |
Oceaneering International and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oceaneering International and Walmart
The main advantage of trading using opposite Oceaneering International and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oceaneering International position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.The idea behind Oceaneering International and Walmart 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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