Correlation Between Wal Mart and Pan Pacific
Can any of the company-specific risk be diversified away by investing in both Wal Mart and Pan Pacific 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 Wal Mart and Pan Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wal Mart de and Pan Pacific International, you can compare the effects of market volatilities on Wal Mart and Pan Pacific 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 Wal Mart with a short position of Pan Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Pan Pacific.
Diversification Opportunities for Wal Mart and Pan Pacific
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wal and Pan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International and Wal Mart 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 Wal Mart de are associated (or correlated) with Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of Wal Mart i.e., Wal Mart and Pan Pacific go up and down completely randomly.
Pair Corralation between Wal Mart and Pan Pacific
Assuming the 90 days horizon Wal Mart de is expected to under-perform the Pan Pacific. In addition to that, Wal Mart is 1.05 times more volatile than Pan Pacific International. It trades about -0.02 of its total potential returns per unit of risk. Pan Pacific International is currently generating about 0.05 per unit of volatility. If you would invest 1,751 in Pan Pacific International on August 28, 2024 and sell it today you would earn a total of 664.00 from holding Pan Pacific International or generate 37.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wal Mart de vs. Pan Pacific International
Performance |
| Timeline |
| Wal Mart de |
| Pan Pacific International |
Wal Mart and Pan Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wal Mart and Pan Pacific
The main advantage of trading using opposite Wal Mart and Pan Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal Mart position performs unexpectedly, Pan Pacific 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 Pan Pacific will offset losses from the drop in Pan Pacific's long position.| Wal Mart vs. Wal Mart de | Wal Mart vs. Fomento Economico Mexicano | Wal Mart vs. Tesco PLC | Wal Mart vs. United Overseas Bank |
| Pan Pacific vs. Wal Mart de | Pan Pacific vs. Dollarama | Pan Pacific vs. PriceSmart | Pan Pacific vs. Dollar General |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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