Correlation Between Walmart and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Walmart and Algoma Steel 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 Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart Inc CDR and Algoma Steel Group, you can compare the effects of market volatilities on Walmart and Algoma Steel 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 Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Algoma Steel.
Diversification Opportunities for Walmart and Algoma Steel
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Algoma is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel Group 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 Inc CDR are associated (or correlated) with Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of Walmart i.e., Walmart and Algoma Steel go up and down completely randomly.
Pair Corralation between Walmart and Algoma Steel
Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.4 times more return on investment than Algoma Steel. However, Walmart Inc CDR is 2.48 times less risky than Algoma Steel. It trades about 0.52 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.08 per unit of risk. If you would invest 3,568 in Walmart Inc CDR on September 1, 2024 and sell it today you would earn a total of 469.00 from holding Walmart Inc CDR or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart Inc CDR vs. Algoma Steel Group
Performance |
| Timeline |
| Walmart Inc CDR |
| Algoma Steel Group |
Walmart and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Algoma Steel
The main advantage of trading using opposite Walmart and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Algoma Steel 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 Algoma Steel will offset losses from the drop in Algoma Steel's long position.| Walmart vs. Amazon CDR | Walmart vs. Berkshire Hathaway CDR | Walmart vs. UnitedHealth Group CDR | Walmart vs. Apple Inc CDR |
| Algoma Steel vs. First Majestic Silver | Algoma Steel vs. Ivanhoe Energy | Algoma Steel vs. Orezone Gold Corp | Algoma Steel vs. Faraday Copper Corp |
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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