Correlation Between Walmart and Southern Empire
Can any of the company-specific risk be diversified away by investing in both Walmart and Southern Empire 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 Southern Empire 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 Southern Empire Resources, you can compare the effects of market volatilities on Walmart and Southern Empire 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 Southern Empire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Southern Empire.
Diversification Opportunities for Walmart and Southern Empire
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Walmart and Southern is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Southern Empire Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Empire Resources 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 Southern Empire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Empire Resources has no effect on the direction of Walmart i.e., Walmart and Southern Empire go up and down completely randomly.
Pair Corralation between Walmart and Southern Empire
Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.17 times more return on investment than Southern Empire. However, Walmart Inc CDR is 5.74 times less risky than Southern Empire. It trades about 0.35 of its potential returns per unit of risk. Southern Empire Resources is currently generating about -0.38 per unit of risk. If you would invest 3,617 in Walmart Inc CDR on August 25, 2024 and sell it today you would earn a total of 318.00 from holding Walmart Inc CDR or generate 8.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 95.65% |
Values | Daily Returns |
Walmart Inc CDR vs. Southern Empire Resources
Performance |
Timeline |
Walmart Inc CDR |
Southern Empire Resources |
Walmart and Southern Empire Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and Southern Empire
The main advantage of trading using opposite Walmart and Southern Empire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Southern Empire 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 Southern Empire will offset losses from the drop in Southern Empire's long position.Walmart vs. Chatham Rock Phosphate | Walmart vs. Alaska Energy Metals | Walmart vs. Elixxer | Walmart vs. Cielo Waste Solutions |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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