Correlation Between Micro Focus and Walmart

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Can any of the company-specific risk be diversified away by investing in both Micro Focus and Walmart 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 Micro Focus and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micro Focus Intl and Walmart, you can compare the effects of market volatilities on Micro Focus and Walmart 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 Micro Focus with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Focus and Walmart.

Diversification Opportunities for Micro Focus and Walmart

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Micro and Walmart is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Micro Focus Intl and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Micro Focus 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 Micro Focus Intl are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Micro Focus i.e., Micro Focus and Walmart go up and down completely randomly.

Pair Corralation between Micro Focus and Walmart

Given the investment horizon of 90 days Micro Focus Intl is expected to generate 6.88 times more return on investment than Walmart. However, Micro Focus is 6.88 times more volatile than Walmart. It trades about 0.09 of its potential returns per unit of risk. Walmart is currently generating about 0.05 per unit of risk. If you would invest  372.00  in Micro Focus Intl on June 27, 2022 and sell it today you would earn a total of  188.00  from holding Micro Focus Intl or generate 50.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.46%
ValuesDaily Returns

Micro Focus Intl  vs.  Walmart

 Performance (%) 
       Timeline  
Micro Focus Intl 
Micro Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Micro Focus Intl are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Micro Focus displayed solid returns over the last few months and may actually be approaching a breakup point.

Micro Price Channel

Walmart 
Walmart Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart Price Channel

Micro Focus and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Micro Focus and Walmart

The main advantage of trading using opposite Micro Focus and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Focus position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.
Micro Focus vs. Industrias Bachoco SA
The idea behind Micro Focus Intl and Walmart 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.
Walmart vs. BUSHVELD MINERALS LTD
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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