Correlation Between Walmart and Western Forest
Can any of the company-specific risk be diversified away by investing in both Walmart and Western Forest 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 Western Forest 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 Western Forest Products, you can compare the effects of market volatilities on Walmart and Western Forest 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 Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Western Forest.
Diversification Opportunities for Walmart and Western Forest
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Walmart and Western is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products 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 Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of Walmart i.e., Walmart and Western Forest go up and down completely randomly.
Pair Corralation between Walmart and Western Forest
Assuming the 90 days trading horizon Walmart Inc CDR is expected to under-perform the Western Forest. But the stock apears to be less risky and, when comparing its historical volatility, Walmart Inc CDR is 1.75 times less risky than Western Forest. The stock trades about -0.1 of its potential returns per unit of risk. The Western Forest Products is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 38.00 in Western Forest Products on December 6, 2024 and sell it today you would earn a total of 4.00 from holding Western Forest Products or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart Inc CDR vs. Western Forest Products
Performance |
| Timeline |
| Walmart Inc CDR |
| Western Forest Products |
Walmart and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Western Forest
The main advantage of trading using opposite Walmart and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest's long position.| Walmart vs. Calibre Mining Corp | Walmart vs. Sun Peak Metals | Walmart vs. Ramp Metals | Walmart vs. GoldQuest Mining Corp |
| Western Forest vs. Interfor Corp | Western Forest vs. Canfor | Western Forest vs. West Fraser Timber | Western Forest vs. Stella Jones |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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