Correlation Between Walmart and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both Walmart and LPKF Laser 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 LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and LPKF Laser Electronics, you can compare the effects of market volatilities on Walmart and LPKF Laser 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 LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and LPKF Laser.
Diversification Opportunities for Walmart and LPKF Laser
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Walmart and LPKF is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Walmart i.e., Walmart and LPKF Laser go up and down completely randomly.
Pair Corralation between Walmart and LPKF Laser
Assuming the 90 days trading horizon Walmart is expected to generate 0.54 times more return on investment than LPKF Laser. However, Walmart is 1.84 times less risky than LPKF Laser. It trades about 0.19 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about 0.0 per unit of risk. If you would invest 4,714 in Walmart on August 24, 2024 and sell it today you would earn a total of 3,696 from holding Walmart or generate 78.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Walmart vs. LPKF Laser Electronics
Performance |
| Timeline |
| Walmart |
| LPKF Laser Electronics |
Walmart and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and LPKF Laser
The main advantage of trading using opposite Walmart and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.| Walmart vs. LPKF Laser Electronics | Walmart vs. X FAB Silicon Foundries | Walmart vs. ARROW ELECTRONICS | Walmart vs. Clean Energy Fuels |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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