Correlation Between Walmart and China Teletech
Can any of the company-specific risk be diversified away by investing in both Walmart and China Teletech 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 China Teletech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and China Teletech Holding, you can compare the effects of market volatilities on Walmart and China Teletech 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 China Teletech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and China Teletech.
Diversification Opportunities for Walmart and China Teletech
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and China is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and China Teletech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Teletech Holding 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 China Teletech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Teletech Holding has no effect on the direction of Walmart i.e., Walmart and China Teletech go up and down completely randomly.
Pair Corralation between Walmart and China Teletech
Considering the 90-day investment horizon Walmart is expected to generate 3.73 times less return on investment than China Teletech. But when comparing it to its historical volatility, Walmart is 37.3 times less risky than China Teletech. It trades about 0.52 of its potential returns per unit of risk. China Teletech Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.22 in China Teletech Holding on September 4, 2024 and sell it today you would lose (0.13) from holding China Teletech Holding or give up 59.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Walmart vs. China Teletech Holding
Performance |
| Timeline |
| Walmart |
| China Teletech Holding |
Walmart and China Teletech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and China Teletech
The main advantage of trading using opposite Walmart and China Teletech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, China Teletech 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 China Teletech will offset losses from the drop in China Teletech's long position.| Walmart vs. Aquagold International | Walmart vs. Thrivent High Yield | Walmart vs. Morningstar Unconstrained Allocation | Walmart vs. Via Renewables |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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