Correlation Between Walmart and New Energy
Can any of the company-specific risk be diversified away by investing in both Walmart and New 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 New Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and New Energy Metals, you can compare the effects of market volatilities on Walmart and New 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 New Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and New Energy.
Diversification Opportunities for Walmart and New Energy
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and New is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and New Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Energy Metals 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 New Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Energy Metals has no effect on the direction of Walmart i.e., Walmart and New Energy go up and down completely randomly.
Pair Corralation between Walmart and New Energy
Considering the 90-day investment horizon Walmart is expected to generate 2.58 times less return on investment than New Energy. But when comparing it to its historical volatility, Walmart is 13.54 times less risky than New Energy. It trades about 0.13 of its potential returns per unit of risk. New Energy Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 207.00 in New Energy Metals on September 1, 2024 and sell it today you would lose (176.00) from holding New Energy Metals or give up 85.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. New Energy Metals
Performance |
| Timeline |
| Walmart |
| New Energy Metals |
Walmart and New Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and New Energy
The main advantage of trading using opposite Walmart and New Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, New 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 New Energy will offset losses from the drop in New Energy's long position.| Walmart vs. Ingles Markets Incorporated | Walmart vs. Grocery Outlet Holding | Walmart vs. Ocado Group plc | Walmart vs. Sprouts Farmers Market |
| New Energy vs. Legacy Education | New Energy vs. Apple Inc | New Energy vs. NVIDIA | New Energy vs. Microsoft |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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