Correlation Between Pan Pacific and Wal Mart
Can any of the company-specific risk be diversified away by investing in both Pan Pacific and Wal Mart 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 Pan Pacific and Wal Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan Pacific International and Wal Mart de, you can compare the effects of market volatilities on Pan Pacific and Wal Mart 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 Pan Pacific with a short position of Wal Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Pacific and Wal Mart.
Diversification Opportunities for Pan Pacific and Wal Mart
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pan and Wal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pan Pacific International and Wal Mart de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de and Pan Pacific 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 Pan Pacific International are associated (or correlated) with Wal Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of Pan Pacific i.e., Pan Pacific and Wal Mart go up and down completely randomly.
Pair Corralation between Pan Pacific and Wal Mart
Assuming the 90 days horizon Pan Pacific International is expected to generate 0.72 times more return on investment than Wal Mart. However, Pan Pacific International is 1.38 times less risky than Wal Mart. It trades about -0.03 of its potential returns per unit of risk. Wal Mart de is currently generating about -0.09 per unit of risk. If you would invest 2,535 in Pan Pacific International on August 28, 2024 and sell it today you would lose (120.00) from holding Pan Pacific International or give up 4.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan Pacific International vs. Wal Mart de
Performance |
| Timeline |
| Pan Pacific International |
| Wal Mart de |
Pan Pacific and Wal Mart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan Pacific and Wal Mart
The main advantage of trading using opposite Pan Pacific and Wal Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan Pacific position performs unexpectedly, Wal Mart 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 Wal Mart will offset losses from the drop in Wal Mart's long position.| Pan Pacific vs. Barratt Developments plc | Pan Pacific vs. J Sainsbury plc | Pan Pacific vs. Kingfisher plc | Pan Pacific vs. Kesko Oyj ADR |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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