Correlation Between Walmart and Borregaard ASA

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

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

Diversification Opportunities for Walmart and Borregaard ASA

0.39

Correlation Coefficient

Walmart  Borregaard ASA

Weak diversification

The 3 months correlation between Walmart and Borregaard is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Borregaard ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borregaard ASA 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 Borregaard ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borregaard ASA has no effect on the direction of Walmart i.e., Walmart and Borregaard ASA go up and down completely randomly.

Pair Corralation between Walmart and Borregaard ASA

Considering the 90-day investment horizon Walmart is expected to generate 0.67 times more return on investment than Borregaard ASA. However, Walmart is 1.49 times less risky than Borregaard ASA. It trades about 0.12 of its potential returns per unit of risk. Borregaard ASA is currently generating about 0.06 per unit of risk. If you would invest  5,062  in Walmart on April 2, 2024 and sell it today you would earn a total of  1,709  from holding Walmart or generate 33.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Walmart  vs.  Borregaard ASA

Walmart

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Borregaard ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Borregaard ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Borregaard ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Walmart and Borregaard ASA

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

The idea behind Walmart and Borregaard ASA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.