Correlation Between Walmart and Smurfit Kappa
Can any of the company-specific risk be diversified away by investing in both Walmart and Smurfit Kappa 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 Smurfit Kappa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Smurfit Kappa Group, you can compare the effects of market volatilities on Walmart and Smurfit Kappa 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 Smurfit Kappa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Smurfit Kappa.
Diversification Opportunities for Walmart and Smurfit Kappa
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Smurfit is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group 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 Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Walmart i.e., Walmart and Smurfit Kappa go up and down completely randomly.
Pair Corralation between Walmart and Smurfit Kappa
Considering the 90-day investment horizon Walmart is expected to generate 1.22 times less return on investment than Smurfit Kappa. But when comparing it to its historical volatility, Walmart is 3.34 times less risky than Smurfit Kappa. It trades about 0.13 of its potential returns per unit of risk. Smurfit Kappa Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,479 in Smurfit Kappa Group on September 3, 2024 and sell it today you would earn a total of 2,023 from holding Smurfit Kappa Group or generate 58.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.46% |
| Values | Daily Returns |
Walmart vs. Smurfit Kappa Group
Performance |
| Timeline |
| Walmart |
| Smurfit Kappa Group |
Walmart and Smurfit Kappa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Smurfit Kappa
The main advantage of trading using opposite Walmart and Smurfit Kappa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Smurfit Kappa 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 Smurfit Kappa will offset losses from the drop in Smurfit Kappa's long position.| Walmart vs. Partner Communications | Walmart vs. Merck Company | Walmart vs. Western Midstream Partners | Walmart vs. Edgewise Therapeutics |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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