Correlation Between Walmart and Ensign Energy
Can any of the company-specific risk be diversified away by investing in both Walmart and Ensign Energy 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 Ensign Energy 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 Ensign Energy Services, you can compare the effects of market volatilities on Walmart and Ensign Energy 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 Ensign Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Ensign Energy.
Diversification Opportunities for Walmart and Ensign Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walmart and Ensign is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Ensign Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Energy Services 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 Ensign Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Energy Services has no effect on the direction of Walmart i.e., Walmart and Ensign Energy go up and down completely randomly.
Pair Corralation between Walmart and Ensign Energy
Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.34 times more return on investment than Ensign Energy. However, Walmart Inc CDR is 2.93 times less risky than Ensign Energy. It trades about 0.12 of its potential returns per unit of risk. Ensign Energy Services is currently generating about 0.01 per unit of risk. If you would invest 2,171 in Walmart Inc CDR on August 27, 2024 and sell it today you would earn a total of 1,764 from holding Walmart Inc CDR or generate 81.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart Inc CDR vs. Ensign Energy Services
Performance |
| Timeline |
| Walmart Inc CDR |
| Ensign Energy Services |
Walmart and Ensign Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Ensign Energy
The main advantage of trading using opposite Walmart and Ensign Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Ensign Energy 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 Ensign Energy will offset losses from the drop in Ensign Energy's long position.| Walmart vs. Maple Leaf Foods | Walmart vs. Algoma Steel Group | Walmart vs. SalesforceCom CDR | Walmart vs. NeXGold Mining Corp |
| Ensign Energy vs. Precision Drilling | Ensign Energy vs. Trican Well Service | Ensign Energy vs. Calfrac Well Services | Ensign Energy vs. NuVista Energy |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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