Correlation Between Walmart and Rio2
Can any of the company-specific risk be diversified away by investing in both Walmart and Rio2 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 Rio2 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 Rio2, you can compare the effects of market volatilities on Walmart and Rio2 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 Rio2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Rio2.
Diversification Opportunities for Walmart and Rio2
Very weak diversification
The 3 months correlation between Walmart and Rio2 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Rio2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio2 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 Rio2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio2 has no effect on the direction of Walmart i.e., Walmart and Rio2 go up and down completely randomly.
Pair Corralation between Walmart and Rio2
Assuming the 90 days trading horizon Walmart is expected to generate 1.5 times less return on investment than Rio2. But when comparing it to its historical volatility, Walmart Inc CDR is 3.24 times less risky than Rio2. It trades about 0.21 of its potential returns per unit of risk. Rio2 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 37.00 in Rio2 on September 1, 2024 and sell it today you would earn a total of 27.00 from holding Rio2 or generate 72.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Walmart Inc CDR vs. Rio2
Performance |
| Timeline |
| Walmart Inc CDR |
| Rio2 |
Walmart and Rio2 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Rio2
The main advantage of trading using opposite Walmart and Rio2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Rio2 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 Rio2 will offset losses from the drop in Rio2's long position.| Walmart vs. Amazon CDR | Walmart vs. Berkshire Hathaway CDR | Walmart vs. UnitedHealth Group CDR | Walmart vs. Apple Inc CDR |
| Rio2 vs. First Majestic Silver | Rio2 vs. Ivanhoe Energy | Rio2 vs. Orezone Gold Corp | Rio2 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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