Correlation Between Walmart and Sprott Lithium
Can any of the company-specific risk be diversified away by investing in both Walmart and Sprott Lithium 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 Sprott Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Sprott Lithium Miners, you can compare the effects of market volatilities on Walmart and Sprott Lithium 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 Sprott Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Sprott Lithium.
Diversification Opportunities for Walmart and Sprott Lithium
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Sprott is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Sprott Lithium Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Lithium Miners 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 Sprott Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Lithium Miners has no effect on the direction of Walmart i.e., Walmart and Sprott Lithium go up and down completely randomly.
Pair Corralation between Walmart and Sprott Lithium
Considering the 90-day investment horizon Walmart is expected to generate 0.58 times more return on investment than Sprott Lithium. However, Walmart is 1.73 times less risky than Sprott Lithium. It trades about 0.34 of its potential returns per unit of risk. Sprott Lithium Miners is currently generating about -0.13 per unit of risk. If you would invest 8,275 in Walmart on August 28, 2024 and sell it today you would earn a total of 675.00 from holding Walmart or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Sprott Lithium Miners
Performance |
| Timeline |
| Walmart |
| Sprott Lithium Miners |
Walmart and Sprott Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Sprott Lithium
The main advantage of trading using opposite Walmart and Sprott Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Sprott Lithium 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 Sprott Lithium will offset losses from the drop in Sprott Lithium's long position.| Walmart vs. Innovative Food Hldg | Walmart vs. Calavo Growers | Walmart vs. The Chefs Warehouse | Walmart vs. AMCON Distributing |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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