Correlation Between Walmart and Allied Energy
Can any of the company-specific risk be diversified away by investing in both Walmart and Allied 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 Allied Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Allied Energy, you can compare the effects of market volatilities on Walmart and Allied 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 Allied Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Allied Energy.
Diversification Opportunities for Walmart and Allied Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Allied is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Allied Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Energy 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 are associated (or correlated) with Allied Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Energy has no effect on the direction of Walmart i.e., Walmart and Allied Energy go up and down completely randomly.
Pair Corralation between Walmart and Allied Energy
Considering the 90-day investment horizon Walmart is expected to generate 3.66 times less return on investment than Allied Energy. But when comparing it to its historical volatility, Walmart is 13.43 times less risky than Allied Energy. It trades about 0.42 of its potential returns per unit of risk. Allied Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1.10 in Allied Energy on August 29, 2024 and sell it today you would earn a total of 0.19 from holding Allied Energy or generate 17.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Allied Energy
Performance |
| Timeline |
| Walmart |
| Allied Energy |
Walmart and Allied Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Allied Energy
The main advantage of trading using opposite Walmart and Allied Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Allied 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 Allied Energy will offset losses from the drop in Allied Energy's long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
| Allied Energy vs. Green Planet Bio | Allied Energy vs. Azure Holding Group | Allied Energy vs. Four Leaf Acquisition | Allied Energy vs. Opus Magnum Ameris |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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