Correlation Between Walmart and AdvanSource Biomaterials

Can any of the company-specific risk be diversified away by investing in both Walmart and AdvanSource Biomaterials 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 AdvanSource Biomaterials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and AdvanSource Biomaterials, you can compare the effects of market volatilities on Walmart and AdvanSource Biomaterials 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 AdvanSource Biomaterials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and AdvanSource Biomaterials.

Diversification Opportunities for Walmart and AdvanSource Biomaterials

-0.29

Correlation Coefficient

Walmart  AdvanSource Biomaterials

Very good diversification

The 3 months correlation between Walmart and AdvanSource is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and AdvanSource Biomaterials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvanSource Biomaterials 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 AdvanSource Biomaterials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvanSource Biomaterials has no effect on the direction of Walmart i.e., Walmart and AdvanSource Biomaterials go up and down completely randomly.

Pair Corralation between Walmart and AdvanSource Biomaterials

If you would invest  6,145  in Walmart on February 20, 2024 and sell it today you would earn a total of  273.00  from holding Walmart or generate 4.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	2.38%
Values	Daily Returns

Walmart  vs.  AdvanSource Biomaterials

Walmart

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AdvanSource Biomaterials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvanSource Biomaterials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AdvanSource Biomaterials is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and AdvanSource Biomaterials

The main advantage of trading using opposite Walmart and AdvanSource Biomaterials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, AdvanSource Biomaterials 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 AdvanSource Biomaterials will offset losses from the drop in AdvanSource Biomaterials' long position.

The idea behind Walmart and AdvanSource Biomaterials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.